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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 1, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-14018
Norrell Corporation
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(Exact name of Registrant as specified in its charter)
Georgia 58-0953079
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3535 Piedmont Road N.E., Atlanta, Georgia 30305
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (404) 240-3000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether 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.
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, as of December 28, 1998, was approximately $224,596,017.30
This amount excludes a total of 10,304,992 shares of Common Stock owned either
directly or beneficially by officers, directors and principal stockholders of
the Registrant, who may be deemed to be affiliates under applicable rules of
the Securities and Exchange Commission. As of December 28, 1998, there were
26,205,595 shares of Registrant's Common Stock, no par value, outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement which will be mailed to
stockholders in connection with the Company's annual meeting of stockholders,
scheduled to be held on March 2, 1999, are incorporated by reference in Part
III of this report. Except for the portions expressly incorporated by
reference, the Company's Proxy Statement shall not be deemed to be a part of
this report.
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PART I
ITEM 1. BUSINESS
GENERAL
Norrell Corporation (referred to herein, along with its subsidiaries and
joint ventures, as the "Company" or "Norrell") is a strategic workforce
management company and a leading provider of staffing, outsourcing and
professional services. The Company is organized into three business groups:
Staffing Services, which provides temporary administrative, teleservices and
light industrial staffing; Outsourcing Services, which provides administrative
services, teleservices and human resources services, in which the Company
assumes responsibility for the results of a client process; and Professional
Services, which provides accounting staffing, information technology staffing,
project management services, systems integration consulting services, and
executive placement. The Company's customers are businesses, professional and
service organizations, and government agencies in the United States, Canada,
United Kingdom, Australia, South Africa and 18 other countries around the
world. Based upon revenues, the Company believes it is one of the largest
companies in the staffing industry in North America.
The Company provides a broad range of services through its international
network of 460 locations, including 141 Company-owned locations, 137
outsourcing services locations, 140 franchised locations, and 42 professional
services offices as of November 30, 1998. In fiscal 1998, the Company supplied
to approximately 18,000 clients (including subsidiaries and affiliated
companies) over 227,000 staffing, outsourcing and professional personnel. The
Company's employees possess a wide variety of office, light industrial,
information technology and other skills, including secretarial, clerical, word
processing, data entry, graphics, telemarketing, assembly, picking, packing and
sorting, shipping and receiving, customer service, records management,
administrative, human resources (recruiting, interviewing, assessment and
training), computer programming, computer consulting, systems analysis, systems
integration, accounting and additional financial services. The Company also
provides home health aides and related services to government agencies and home
health agencies.
Since its incorporation in Georgia in 1965, the Company's quality service
and customer focus have enabled it to compile a history of core business growth
and expansion. From its beginnings as a provider of short-term replacement or
fill-in personnel, often referred to as traditional temporary services, the
Company has expanded into long-term staffing, managed staffing, "Master Vendor
Partnering", outsourcing and professional services. In addition, the Company
has expanded geographically from a base of locally owned and operated offices
in Atlanta, Georgia, to an international network of 460 locations as of
November 30, 1998. In recent years, the Company has supplemented this internal
growth with acquisitions and joint ventures, which has not only added to the
Company's geographic markets, but has also increased revenues and expertise in
desirable service offerings such as information technology, financial services,
teleservices, and executive placements.
BUSINESS STRATEGY
The Company's objective is to continue to be a leading provider of
staffing, outsourcing, and professional services. The key components of the
Company's strategy are as follows:
Offer a Seamless Spectrum of Strategic Workforce Management Solutions.
Through its network of offices, the Company offers strategic workforce
management for clients committed to high quality, value-added services which
are customized to strengthen a specific client's organizational effectiveness
and flexibility. The Company partners with these clients to diagnose workforce
problems and design an integrated service solution, ranging from short-term
staff augmentation to comprehensive workforce structures that include dedicated
management teams.
Maintain High Quality Service Focus. The Company is dedicated to providing
high quality services and believes it is an industry leader in its quality
focus and related performance measurement systems. To maintain a consistently
high quality standard for all of its employees, the Company uses a number of
automated systems to screen and evaluate potential employees, to make
appropriate assignments to evaluate and review employees' performance, and to
obtain and act upon client feedback. These extensive, integrated and automated
quality measurement and control systems distinguish the Company from its
competitors and help to attract and retain customers seeking consistency in
results and approach to their staffing needs. The Company has made a
substantial
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investment in and intends to continue to invest in technology and information
related software and hardware. See "Quality and Technology." These investments
have included integrating the Company's personnel and client databases
nationwide, automating many tasks at the branch level, and enhancing
back-office efficiency.
Develop and Expand Service Offerings. The Company plans to grow its
existing base of business by continuing to develop service offerings that
complement its core business. Services added in the last several years include
information technology staffing and consulting (including systems integration),
financial staffing, outsourced call center management, and executive
placements. By cross-selling these new services to existing accounts, the
Company seeks to increase the volume of business within its current base of
over 18,000 clients. The Company also plans to attract new clients based upon
its comprehensive solutions approach. In addition to expanding its existing
service offerings, the Company continually evaluates new service offerings
which will enable it to better meet its clients' needs.
Pursue Strategic Acquisitions. The Company intends to continue to pursue
acquisition opportunities that allow the Company to develop new services,
acquire additional management expertise or enter key geographic markets. Since
July 1995, the Company has acquired five information technology services, one
accounting services and three staffing services businesses, and one executive
temporary and permanent placement firm. In 1998, the Company acquired its first
company outside North America - FSS International Limited in the United
Kingdom. FSS focuses upon financial and information technology recruitment and
international search and selection. The Company believes that the professional
services acquisitions represent business opportunities with growth and
profitability potential in excess of the Company's core staffing business.
BUSINESS GROUPS
The Company has classified its businesses into three business groups:
Staffing Services, Outsourcing Services, and Professional Services. The
following describes the services provided by each of the Company's business
groups. All information concerning fiscal 1997 revenues provided below has been
adjusted to exclude results attributable to a 53rd week of operations, which
occurs every five or six fiscal years. In addition, certain amounts have been
reclassified for the 1997 period to conform to the 1998 presentation.
Staffing Services
The Company's staffing services are generally performed by its subsidiary,
Norrell Services, Inc. In addition, Norrell Health Care provides staffing in
the health care field, primarily in the states of New York, New Jersey and
Pennsylvania. During fiscal 1998, the Company generated $911.6 million from its
Staffing Services business, compared with revenues of $867.8 million during
fiscal 1997.
Temporary Staffing. Employees may be assigned to work for a client for
either a specified or indefinite period of time as necessary to meet the needs
of the client. The expense and inconvenience to a client of recruiting workers,
including advertising, interviewing and testing, conducting reference and
background checks and drug testing are reduced when temporary personnel are
engaged. Use of these services also enables the client to eliminate or reduce
record keeping, expenses associated with fringe benefits, turnover and related
personnel costs usually associated with its workers. A client pays only for
actual hours worked by temporary personnel and may terminate the use of
temporary services without the adverse effects of layoffs. The Company also
offers short-term staffing, sometimes referred to as project or peak period
staffing, through which the Company can meet fluctuating staffing requirements
quickly and easily, helping clients maintain high levels of productivity
without the need to add permanent staff. The Company defines short-term
staffing as an assignment of less than six months that involves one-time,
seasonal or recurring use of temporary employees.
Long-Term Staffing. The Company offers long-term staffing options tailored
to specific client needs. Through long-term staffing, the Company provides and
supervises employees for functions or departments on an extended basis. The
Company defines long-term staffing as the staffing of specific positions for
six months or more.
Managed Staffing. The Company emphasizes managed staffing, which is the
staffing of positions with personnel on a planned and continuing basis, in most
cases with one of the Company's on-site managers who is trained to manage the
contingent workforce process. Managed staffing represents a cost-effective
solution for employers who spend a significant amount of administrative and
personnel department time managing employees
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whose jobs are generally routine and are characterized by high turnover rates
and also for employers in industries with fluctuating personnel needs. Such
employers use staffing personnel as a valuable management tool to control
overhead costs and enhance profitability. Examples of managed staffing clients
of the Company include customer service centers, distribution centers, and
various light manufacturing and packaging businesses.
Master Vendor Partnering ("MVP"). The Company offers its MVP program to
its clients in conjunction with its other service offerings. Through its MVP
program, the Company acts as a general manager for all of the client's external
staffing needs. The Company provides a broad spectrum of solutions from
staffing to call center services to information technology services to help the
client meet its changing needs. The MVP program enables the client to
significantly increase its organizational flexibility and effectiveness.
Outsourcing Services
The Company provides a portfolio of outsourcing services including
administrative (secretarial, clerical, graphics, desktop publishing,
multimedia), corporate and general services (mail center management, courier
management, shipping/receiving, records retention), document processing
(imaging, personnel records management, electronic data interchange, accounts
payable, data entry, invoicing), human resources (recruiting, interviewing,
assessment and training) and call center services. Typical outsourcing
arrangements have many of the following characteristics: the Company supplies
and manages the staff, the agreement contains specific service productivity and
quality measurements, extends a year or longer, covers a defined scope of work,
and has a gainsharing agreement. Outsourcing services are generally performed
by the Company's subsidiaries, Tascor Incorporated, CallTask Incorporated and
NorCross Teleservices, Inc. In fiscal 1998, the Company's outsourcing revenues
were $270.2 million, an increase of 8.3% over fiscal 1997, which had $249.6
million in outsourcing revenues.
Professional Services
The Company's Professional Services group includes Norrell Information
Services, Inc., a subsidiary of the Company, Norrell Financial Staffing, a
division of the Company's Norrell Services, Inc. subsidiary, FSS International
Limited, a United Kingdom financial and information technology company acquired
during fiscal 1998, and IMCOR, Inc., an executive temporary and permanent
placement firm acquired in 1997. The Company generated $228.7 million in
revenues from its professional services offering in fiscal 1998, compared with
$157.7 million in fiscal 1997, a 45.1% increase.
Information technology services is one of the Company's newest products,
built with a number of acquisitions over the last several years. Analytical
Technologies, Inc. and ANATEC Canada, Inc. (collectively referred to as
"ANATEC") and American Technical Resources, Inc. ("ATR") were acquired in
fiscal 1996, and Comtex Information Systems, Inc. ("Comtex") was acquired in
fiscal 1997. In fiscal 1998, the Company acquired two additional information
technology companies in the United States: The Trattner Network Ltd. and W.E.
Carson Associates, Inc. The Company made significant progress during fiscal
1998 in integrating these acquisitions into Norrell Information Services, which
delivers full life-cycle solutions including technology consulting, project
management, software development, documentation services, and education and
training. Norrell Information Services also provides systems planning and
development, systems integration, organizational consulting related to business
transformation, and staff augmentation support, and provides contract employees
from its national database of information technology professionals. Revenues
from the Company's information technology services increased from $133.2
million in fiscal 1997 to $181.2 million in fiscal 1998, an increase of 36.1%.
The Company's Norrell Financial Staffing division is led by staffing
consultants who are experienced accounting and financial professionals with the
ability to recruit, screen and hire financial specialists ranging from a chief
financial officer to an accounting clerk.
In August, 1998 the Company acquired FSS International Limited, a
financial and information technology recruitment company located in the United
Kingdom. FSS operates in three business groups: Professional Services, which
focuses primarily upon permanent and contract recruitment of accounting and
finance staff; Information Technology, which focuses primarily upon the search
and selection of senior information technology staff; and International Search
and Selection, which engages in executive searches for clients in the United
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Kingdom, Europe, North America and emerging markets. FSS has three offices in
the United Kingdom and offices in Sydney, Australia and South Africa and serves
clients in numerous countries around the world.
In October, 1997, the Company acquired IMCOR, Inc., an executive temporary
and permanent placement firm based in Stamford, Connecticut. IMCOR recruits,
screens and hires "portable" executives and places them in client organizations
throughout the United States. IMCOR executives work as interim managers and
project leaders in areas such as general management, finance, operations,
information technology, manufacturing, marketing, human resources and strategic
planning. IMCOR executives perform services on an as-needed basis or to allow
the client to assess the executive's ability prior to making an offer to hire
the executive.
QUALITY AND TECHNOLOGY
The Company is dedicated to providing high quality services and believes it
is an industry leader in its quality focus and technological approach including
related measurement systems. In order to maintain a consistently high quality
standard for all of its temporary and staffing employees, the Company uses
automated systems to screen and evaluate potential employees, to make
appropriate assignments, and to evaluate and review an employee's performance.
The Company's quality system, Qualisys, is comprised of three major components:
(i) Exact Match(SM), a screening and placement process which matches the
employee to the client's needs; (ii) B.O.S.S., its Branch Office Support System,
an extensive database of client and personnel information; and (iii) I.R.I.S.
(SM), or Integrated Research Information System, by which the Company obtains
direct client feedback and measures individual employee performance. These
automated services enable the Company to provide staffing services quickly and
efficiently, monitor client needs and utilization trends, measure the Company's
service quality and evaluate and train its employees. This extensive, integrated
and automated quality measurement and control system distinguishes the Company
from its competitors. With its outsourcing clients, the Company also develops
customized performance measurement benchmarks and systems for each client
contract as requested. These standards and systems are designed with client
input and take into account clients' quality needs and standards.
In fiscal 1997 and 1998, the Company conducted a comprehensive review of
its systems to assess their capability to meet long term business needs. During
fiscal 1998, the Company made a substantial investment to enhance its systems.
These enhancements are designed to support the substantial growth of the
Company, provide better support for the Company's national accounts, and
facilitate the integration of newly acquired companies. The Company is still in
the process of implementing many of the changes to its systems resulting from
this investment. The Company anticipates no disruption in business during
implementation of its systems improvements.
In a related effort, the Company has conducted a comprehensive review of
its computer systems and has developed a comprehensive Year 2000 project plan
which addresses both technological and embedded systems for all business units.
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. If this issue is not
addressed appropriately and in a timely manner, any of the Company's programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000, resulting in a major system failure or
miscalculations. The Company has designated a Year 2000 Core Team to lead
efforts using a multi-phase approach. Both internal and external resources are
being employed to identify, correct and test systems to achieve Year 2000
compliance. The Company is also reviewing the Year 2000 readiness of third
parties which provide goods or services essential to the Company's operations.
Based on current information, the Company believes that the Year 2000 problem
will not have a material adverse effect on the Company, its business or its
financial condition. There can, however, be no assurances that Year 2000
remediation by the Company or third parties will be properly and timely
completed, and failure to do so could have a material adverse effect on the
Company, its business and its financial condition. For a more complete
discussion of the Year 2000 issues and plans, please see "Year 2000 Issues" in
Item 7 (Management's Discussion and Analysis of Financial Condition and Result
of Operations) in Part II of this Annual Report on Form 10-K.
ORGANIZATIONAL STRUCTURE
As of the end of the fiscal year 1998, the Company provided its services
through a network of 465 staffing services locations (which includes
Company-owned and franchised locations), outsourcing locations, and
professional services locations. The table below sets forth certain historical
information concerning the number of Company locations:
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<TABLE>
<CAPTION>
As of the End of Fiscal Year
1994 1995 1996 1997 1998
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<S> <C> <C> <C> <C> <C>
Staffing Services Offices:
Company-Owned Offices 115 121 133 152 145
Franchised Offices(1) 107 119 133 134 138
Outsourcing Locations(2) 75 91 105 134 137
Professional Services Offices(3) 2 21 30 48 45
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Total Company Offices and Locations 299 352 401 468 465
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</TABLE>
During fiscal 1997, the Company focused upon aligning its organization to
better support its vision as a strategic workforce management company. Through
the efforts of multiple task-forces which analyzed many aspects of the
Company's business approaches and methods, the Company reorganized to enhance
the structure of its field organization, corporate resources and its methods of
selling and supplying its services. While some of the changes resulting from
this process were implemented during fiscal 1997, much of this realignment
occurred in fiscal 1998. The organizational structure of the Company is
described below.
Staffing Services
Company-Owned Operations. The Company owns and operates staffing services
offices in major markets in the United States, which are organized by function.
The service delivery function is managed by an area or regional service
manager, who in turn reports to either a divisional vice president of service
delivery or the senior vice-president of service delivery in the Company
headquarters. The sales function in each office is managed by a regional sales
vice-president or a divisional sales vice-president. A senior vice-president of
account development in the Company headquarters is responsible for the overall
effectiveness of the field sales efforts. The Company provides training to
field managers, sales representatives and operations personnel in the areas of
sales and client development, recruitment and retention of staffing employees
and the implementation of Norrell's marketing strategies.
For its global and national accounts, the Company has dedicated sales and
service teams who are primarily responsible for the sales and service delivery
functions for their specified accounts. A number of the Company's global and
national accounts have an account executive responsible for managing both the
service delivery team and the sales team assigned to the account. The sales and
service teams for national and global accounts work closely with sales and
service in the field organization to provide enhanced services to these
accounts.
A substantial portion of field employees' compensation is based on
financial performance, including the attainment of profit objectives.
Company-owned offices operating in "middle markets" (generally markets with
populations between 500,000 and 1.5 million) are operated under special
incentive arrangements by managers who receive lower salaries and higher
incentive compensation relative to managers of other Company-owned offices.
Franchised Operations. The Company operates franchised offices throughout
the United States and in Canada and Puerto Rico. The Company developed its
initial franchise strategy in the mid-1960s as an important element of its
overall growth plans. Franchising provides the opportunity to enter targeted
markets with substantially less capital than would be required to establish
Company-owned offices. The Company's primary franchise target markets are
cities with populations between 50,000 and 500,000 people. The Company also
establishes franchised offices under its trade name Dynamic People to increase
market penetration in major markets in which the Company may also operate
Company-owned offices. Like the company-owned offices, the sales and service
functions of the franchise offices are segregated at the management level. A
manager of sales for a certain geographic area oversees sales efforts for the
franchise offices, and a manager of service for a similar geographic area
oversees the service delivery process.
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(1) / Occasionally, the Company acquires a franchised office and operates it as
a Company-owned office until it is refranchised. Such offices are included in
franchised locations.
(2) / Outsourcing services are generally performed at the clients' facilities.
(3) / Most of the offices of Norrell Financial Staffing included in the number
of Professional Services Offices share space with offices also listed above as
Company-Owned Offices.
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Outsourcing Operations
The Company currently has operations at sites throughout the United States
responsible for the delivery of outsourcing services. The majority of the
Company's outsourcing operations are located on site at its customers'
facilities, and the remaining outsourcing sites are located in leased offices.
Other than regional offices and its corporate offices in the Company's
headquarters building, the Company's outsourcing subsidiary does not maintain
sales or administrative offices separate from the locations at which client
services are performed, allowing the Company to control the growth of overhead
costs. Outsourcing services are delivered by employees who are hired by the
Company to perform services during the term of an outsourcing contract. These
employees and related field operations are managed by the Company's site
managers and area managers who are responsible for service delivery, customer
satisfaction, and sales of additional services to current customers through
both expansion of existing contracts as well as the addition of new contracts.
Professional Services Operations
The Company maintains professional services offices in the principal
markets it serves. Each location is managed by a financial or information
technology professional responsible for its marketing strategies. During 1998,
the Company continued its consolidation of its United States information
technology operations into Norrell Information Services and organized Norrell
Information Services into two divisions: the Norrell Information Services
Technical Resources Division and the Norrell Information Services Consulting
Division.
SALES AND MARKETING
The Company has developed a sales and marketing strategy which is
implemented through its Company-owned and franchised staffing services offices,
its national account and global alliance organizations, its on-site and
off-site outsourcing services locations, and its professional services
locations. The Company executes this strategy on both a national and local
level and in some cases on a global basis. Sales and service for national and
global accounts is conducted by dedicated sales and service teams, managed from
the Company's headquarters, with support from the field sales and service
teams. Pursuing national and global account relationships is important to the
Company's growth due to the consolidation of vendors by large national clients
and due to the broad spectrum of services these customers desire. Local
accounts are developed by the field sales organization, primarily through
client referrals, community involvement and direct contacts with prospective
clients. Contacts are made through sales representatives, telephone marketing
calls and direct mail solicitation.
For all traditional staffing clients, the Company has developed a system
of formal consultation with its clients' management to determine the clients'
specific requirements and to evaluate their potential use of staffing
personnel. This approach involves: (i) an in-depth study of the client's
corporate attitudes and departmental organization to gain insight into the
client's operating philosophy; (ii) an analysis of the client's performance
expectations and work experience requirements for staffing personnel; (iii) a
job-by-job analysis of the cost effectiveness the client can expect from the
use of the Company's staffing employees; and (iv) on-going management reports
evaluating the actual results of utilizing the Company's services. This process
facilitates an effective match of a client's needs with skills of the staffing
employee and enables the client to analyze its use of staffing services.
The Company's sales efforts for its outsourcing and professional services
offerings are accomplished by both the field sales organization and the
national accounts teams. Functional experts from Norrell's spectrum of
services, including information services, financial staffing, call center
services and outsourcing provide invaluable sales support with these service
offerings. New sales are generally made to companies at the senior executive
level. Sales of outsourcing and professional services to an existing client are
made by both the operations management team responsible for the client and the
field sales organization and the national accounts organization.
The development of awareness and preference for both the Norrell brand and
the Company's service offerings is a primary initiative of the corporate sales
and marketing and communications departments. Through a variety of national and
local marketing vehicles and public and media relations, the Company
communicates the attributes of a brand position and service offerings to
current customers, prospects and the business community. By definition,
Strategic Workforce Management is the strategy and process by which the Company
delivers competitive advantage to its clients through an array of integrated
workforce solutions. This approach also serves to articulate the value
proposition that enables the Company to differentiate and favorably position
its brand as well as communicate
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compelling attributes relative to its individual service offerings. For
recruitment purposes, the Company and its franchisees utilize a multi-tier
marketing strategy to attract and retain employees to fill the broad spectrum
of staffing and outsourcing services.
RECRUITING AND PLACEMENT
The Company's staffing personnel are primarily individuals between jobs or
careers, individuals re-entering the job market or individuals who prefer the
flexibility and variety of shorter-term work assignments. A substantial
proportion of new staffing personnel are obtained through referrals by other
Norrell personnel. Staffing personnel are also recruited through local and
national advertising media. Due to shortages in the labor market, the Company
focuses upon developing and implementing recruiting techniques which will
attract and retain qualified personnel.
The Company conducts an interviewing and testing process to screen and
evaluate the skills of potential personnel. Company-developed or purchased
programs are used to determine skill levels and work attitudes in order to
assist in making proper assignments. The Company provides training programs to
increase and improve the skills of its personnel. To maintain the quality and
effectiveness of its staffing workforce, the Company uses the I.R.I.S. system
to review an employee's performance with the client.
To be able to meet demand for qualified home health personnel, who are
generally in short supply, the Company recruits employees and conducts a
two-week training program to qualify employees as certified home health aids or
a one-week training program to qualify them as personal care aides. These
training programs effectively increase the Company's supply of qualified aides.
MAJOR CLIENTS
The Company receives a material portion of its revenues from its largest
clients. During fiscal 1997 and 1998, revenues generated by the Company from
contracts with IBM equaled $171.9 million and $176.8 million, respectively,
representing 13.2% and 12.5%, respectively, of the Company's consolidated
revenues for such periods. During fiscal 1998, the Company received $36.5
million in revenues for services performed under a Management Services
Agreement with IBM. The balance of the Company's IBM-related revenues are
consolidated under multiple contracts with different purchasing units within
IBM.
No other client accounted for more than 10% of the Company's consolidated
revenues for fiscal 1997 or 1998. However, the loss of, or a substantial
reduction in the revenue provided by IBM could have a material adverse effect
on the Company. Moreover, the Company's results of operations can be highly
sensitive to changes in the business of its major clients and changes in its
relationships with such clients.
COMPETITION
The staffing industry is highly competitive with more than 7,000 temporary
services and staffing companies operating in the United States. The staffing
services provided by the Company also are provided by several other companies
with nationwide operations that have substantially greater resources than the
Company. In addition, the Company competes with numerous local and regional
companies, which are frequently the strongest competitors in their particular
markets. Accordingly, the Company's competition varies from market to market.
Although the Company and other national firms benefit from having nationally
recognized names, the Company believes that its customers primarily
differentiate among firms by comparing the quality of personnel and services
provided by each local office. Customers typically use more than one staffing
firm to satisfy their personnel requirements.
The largest competitors of the Company's temporary and staffing personnel
offerings include Kelly Services, Inc., Manpower Inc., Adecco SA, AccuStaff,
Inc., The Olsten Corporation and Interim Services. In addition, there are a
number of other firms with annual sales in excess of $100 million, many of
which are regional and/or emphasize specialized niches. There are also numerous
local and single office firms which are able to compete on price because of
their lower overhead structures. These firms are typically located in one city
and some are able to compete effectively on that limited basis.
The Company believes that no single competitor has more than a 10% share
of the national staffing services market. Nevertheless, the Company anticipates
that the industry will continue to consolidate with the large national
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firms increasing their market share at the expense of firms that may lack the
capital to compete operationally with larger industry competitors.
The temporary health care market also is highly fragmented and competitive
at the local level. While several national health care companies compete with
the Company in its markets, many local health care staffing services and home
health agencies also compete with the Company. Selections of home health aide
services are made primarily on a local basis by agencies and health care
administrative personnel.
The principal competitive factors in the temporary services industry are
the availability and quality of personnel, the level of service, the effective
monitoring of job performance and the price of service. The Company believes
that it competes favorably in these areas.
The Company believes that the largest companies that compete with its
outsourcing offering are "niche" players which do not compete with the
Company's full range of outsourcing services. These outsourcing services
providers offer a more limited range of services, assuming responsibility for
functions such as food services, facilities maintenance, mailrooms or
reprographics.
Tascor's principal competitors for its outsourcing services are companies
such as Pitney-Bowes, Inc., an equipment manufacturer which provides mailroom
services; Xerox, an equipment manufacturer that provides reprographics
services; Kelly Services, Manpower and other large staffing firms which are
attempting to expand their services offerings; and Host Marriott Corporation,
which is expanding beyond its traditional hospitality and food services
operations in the area of facilities staffing.
In the professional services industry, a large number of national
companies provides information technology consulting services related to
systems planning and development and business processes and transformation,
including Andersen Consulting, IBM Global Services and Electronic Data Systems.
Staff augmentation services in the information technology field are provided
primarily by regional and local firms as well as some national firms.
Competitive factors in the information technology industry include a proven
track record in the marketplace, recruitment and retention of employees with
the appropriate skills, development and implementation of effective
methodologies, and process and business expertise.
PERSONNEL
As of December 28, 1998, the Company employed approximately 9,500
associates and contract employees, which includes employees who perform
services on outsourcing contracts. In addition, during fiscal 1998, the Company
placed approximately 227,000 temporary and staffing personnel on assignments,
including those operating out of franchised offices. The Company has no
collective bargaining agreements with its employees. The Company believes that
it has good relations with its employees.
SERVICE MARKS
The Company is the owner of various service marks, including Norrell, The
Norrell Advantage, Dynamic, Dynamic People, Smarter Ways to Get Things Done,
Tascor and ANATEC, and the Company has applied for a service mark for Strategic
Workforce Management. The Company protects its service marks and believes that
the "Norrell" service mark is an important asset to the Company's operations.
GOVERNMENTAL REGULATION
The marketing of the Company's franchises is subject to the disclosure
requirements of the Federal Trade Commission and the registration and/or
disclosure requirements of certain states. In certain states, the Company's
relationship with its franchisees also are governed by the franchise laws of
such states.
The Company's home health aide business operates in New York, New Jersey,
and Pennsylvania which require licensing of home care providers. In those
states, the Company is subject to periodic licensure surveys to ensure
continued compliance with licensing requirements. A change in control or the
sale of the Company's home health aide business must be approved by the Public
Health Council of the New York State Department of Public Health.
10
<PAGE> 11
In certain states, companies which engage in permanent placement are
subject to regulations. The Company analyzes the applicability of these state
regulations to the permanent placement activities of Norrell Financial Staffing
and IMCOR and complies with these requirements, if applicable. In addition,
certain states require licensure and otherwise regulate companies which provide
employee leasing services. The Company analyzes these state laws in light of
its service offerings and complies when the state law is applicable.
SEASONALITY
Revenues and profits generated in the Company's fourth fiscal quarter
(August through October) are typically the highest of its four fiscal quarters.
Management believes that this results from a heavier demand during this period
and because the fourth quarter includes only one nationally observed holiday.
Conversely, revenues for the first fiscal quarter (November through January)
are typically the lowest of its four fiscal quarters due to the reduced number
of business days for many of the Company's clients because of the number of
observed holidays and inclement weather. Revenues and operating profits for the
Company's first quarter are typically less than the fourth quarter of the
previous year.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Part I and Item 7 (Management's Discussion and Analysis of Financial
Condition and Results of Operations) of this Annual Report on Form 10-K contain
forward-looking statements, including statements regarding, among other
matters: (i) the Company's plans, intentions and expectations with respect to
its future prospects, including its business and growth strategies and its
relationships with its major clients; (ii) industry trends, competitive
conditions and client preferences; (iii) expected capital expenditures to be
made in the future, including investments in its computerized management
information systems; (iv) the sufficiency of funds from operations and
available borrowings to meet the Company's working capital and capital
expenditure needs for fiscal 1999; (v) the Company's plans, beliefs and
expectations with respect to changes which have been or will be made to its
computerized management information systems, including modifications to its
payroll and billing systems and other modifications to address Year 2000
issues; and (vi) resolution of pending litigation without material adverse
effect on the Company. This notice is intended to take advantage of the "safe
harbor" provided by the Private Securities Litigation Reform Act of 1995 with
respect to such forward-looking statements. These forward-looking statements
involve a number of risks and uncertainties. Among others, factors that could
cause actual results to differ materially from the Company's beliefs or
expectations are the following: industry trends and trends in the general
economy or in industries in which the Company's major clients operate;
competitive factors in the markets in which the Company or its major clients
operate; the loss or reduction of revenues generated by the Company's major
clients; the variability of quarterly results and seasonality of the Company's
business; the dependence on key personnel who have been hired or retained by
the Company; changes in regulatory requirements which are applicable to the
Company's business; the availability of strategic acquisitions or joint venture
partners; and other factors referenced herein or from time to time in the
Company's Securities and Exchange Commission reports.
ITEM 2. PROPERTIES
The Company leases approximately 203,000 square feet of the building which
houses its office headquarters pursuant to lease agreements which expire
between September 30, 1999 and June 30, 2007.
At November 1, 1998, the Company was committed under operating leases for
office facilities and certain equipment. Aggregate minimum rental requirements
under these leases are as follows:
<TABLE>
<CAPTION>
--------------------------------------
YEAR AMOUNT
(IN THOUSANDS)
--------------------------------------
<S> <C>
1999 $12,839
--------------------------------------
2000 11,570
--------------------------------------
2001 10,254
--------------------------------------
2002 8,887
--------------------------------------
2003 7,266
--------------------------------------
Thereafter 19,269
--------------------------------------
TOTAL $70,085
</TABLE>
11
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to ordinary, routine litigation
incidental to the Company's business. The Company believes that the ultimate
resolution of all pending litigation will not have a material adverse effect on
the Company's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of fiscal 1998 to a vote
of security holders.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers are elected annually and serve at the
discretion of the Board of Directors. Information concerning the executive
officers, as of January 1, 1999, is provided below.
<TABLE>
<CAPTION>
Name Age Position
- - ---- --- --------
<S> <C> <C>
C. Douglas Miller................57 Director; Chairman, Chief Executive Officer and President
J. Ernest Riddle.................57 Director; Chief Operating Officer, Norrell Corporation;
President, Norrell Services, Inc.
Larry J. Bryan...................55 Director; Executive Vice President
Thomas A. Vadnais ...............51 Director; President, Global Alliance; President and Chief
Operating Officer, Tascor Incorporated
Mark H. Hain.....................49 Senior Vice President, Secretary and General Counsel
Scott L. Colabuono...............50 Senior Vice President, Chief Financial Officer
Theresa G. Williams..............39 Senior Vice-President, Service Delivery
Ronald T. Self...................42 Senior Vice President, Sales and Marketing
Claude H. Denker, III............40 Senior Vice President, Customer Development, East
Scott S. Barth...................41 Senior Vice-President, Customer Development, West
Stanley E. Anderson..............45 President, Norrell Information Services, Technical Resources
Division
Wayne M. Mincey..................41 President, Norrell Information Services, Consulting Division
Ted A. Jurkuta...................46 Senior Vice President and Chief Information Officer
Robert W. Grissom, Jr............41 Senior Vice President, Franchise Division, Norrell Services
Paul J. Seymour..................40 Vice President, Human Resources
</TABLE>
C. Douglas Miller was elected Chief Executive Officer and President of the
Company effective October 15, 1993. He joined Norrell Services in 1979 and
served as President and Chief Operating Officer of the Company immediately
prior to his election as President and Chief Executive Officer. Mr. Miller is
also Chairman of the Company's Board of Directors and a director of American
Business Products, Inc.
J. Ernest Riddle joined Norrell Corporation in March 1997 as Chief
Operating Officer of Norrell Corporation and President of Norrell Services,
Inc., and also serves as a member of the Company's Board of Directors. Prior to
joining the Company, Mr. Riddle served as President of Ryder International for
over a year, after serving as Senior Vice
12
<PAGE> 13
President and Executive Vice President, Marketing and Sales, with Ryder Systems,
Inc., since January 1993. Mr. Riddle was a Vice President, Marketing and Sales,
for Xerox Corporation for ten years prior to joining Ryder Systems, Inc.
Larry J. Bryan joined the Company in October 1985 and is an Executive Vice
President of the Company. Prior to his current position, Mr. Bryan was Chief
Financial Officer of the Company.
Thomas A. Vadnais joined the Company on September 1, 1992 and is currently
President, Global Alliance. Mr. Vadnais also serves as President and Chief
Operating Officer of Tascor and is a member of the Board of Directors for the
Company. He previously held the position of Vice-President, National Service
Management. Prior to joining the Company, Mr. Vadnais was a Vice President of
Operations for the national distribution division of International Business
Machines Corporation, where he was employed for 24 years.
Mark H. Hain is Senior Vice President, Secretary and General Counsel to
the Company. Prior to his promotion to Senior Vice President in 1998, Mr. Hain
was Vice President, Secretary and General Counsel to the Company, a position he
held since March 1, 1988, when he joined the Company.
Scott L. Colabuono joined the Company January, 1998 as Senior Vice
President and Chief Financial Officer. Prior to joining the Company, Mr.
Colabuono served from February, 1997 until December, 1997 as President of the
Golf Center Business Division of Golden Bear Inc. From 1995 until joining
Golden Bear, Inc., Mr. Colabuono was a Financial Consultant. From 1990 to 1995,
Mr. Colabuono served as Senior Vice President - Worldwide Brand Strategy and
Chief Financial Officer of Burger King Corporation, and from 1988 to 1990, Mr.
Colabuono served as Senior Vice President - Financial Operations, Sprint
Corporation and Executive Vice President and Chief Financial Officer for U. S.
Sprint.
Teresa G. Williams is Senior Vice President, Service Delivery, a position
she has held since November, 1998. Prior to her current role, Ms. Williams
served as Vice President, Customer Development for the East Division. Ms.
Williams has been employed with the Company since March, 1984 and has
previously held the positions of Division Vice President and General Manager of
the Mid-Atlantic Division; Region Vice President; Region Manager; and Branch
Manager.
Ronald T. Self joined Norrell Services on August 31, 1990. He is currently
Senior Vice President of Sales and Marketing. He has held the positions of
Senior Vice President and General Manager, Metro Markets Division, Norrell
Services; Vice President and General Manager, Central Division; and Vice
President - Major Accounts, and Market Vice President. From 1986 to 1990, Mr.
Self was employed by Coca-Cola U.S.A., Atlanta, Georgia, most recently as
Southeast Area Manager.
Claude H. Denker, III is currently Senior Vice-President of Customer
Development for the Eastern Division. Prior to his current role, Mr. Denker
served as Vice-President of National Accounts, the position he assumed when he
joined the Company in August 1996.. Prior to joining the Company, Mr. Denker
was employed by The Pillsbury Company, in the positions of Vice-President,
Sales for the Southeastern Region and Vice-President, Strategic Account
Initiatives.
Scott S. Barth is Senior Vice-President, Customer Development, West
Division and has served in that capacity since he joined the Company in April,
1998. Prior to joining the Company, Mr. Barth was employed by The Pillsbury
Company, where he was Vice President, Sales. Prior to his employment with The
Pillsbury Company, Mr. Barth was employed by Pepsi Cola Company as Vice
President, Rocky Mountains.
Stanley E. Anderson has been employed by Norrell Services since 1981. He
is currently President of Norrell Information Services, Technical Resources
Division. Prior to his current position, Mr. Anderson served as President,
Southeast Division, Norrell Information Services. Previously, he held the
positions of Senior Vice President of Business Development; Vice President and
General Manager, Southeast Division; Vice President and General Manager, East
Division; Vice President of Franchise Development; Regional Manager; Branch
Manager; and Sales Training Manager.
13
<PAGE> 14
Wayne M. Mincey is President, Norrell Information Services Consulting
Division, a position he assumed in August, 1998. Prior to his current role, Mr.
Mincey was Vice President, Strategic Planning, a position he held since
September 1997 when he joined the Company. Prior to joining the Company, Mr.
Mincey served as Vice President, Operations for Ryder TRS, Inc. Mr. Mincey also
served as Vice President - Eastern Area U.S., and Vice President - Development
and Operations for Ryder Consumer Truck Rental, Inc. Prior to joining the truck
rental division, Mr. Mincey served as Group Director - Business and Financial
Planning for the Vehicle Leasing and Services Division of Ryder Systems, Inc.,
and also as Chief Financial Officer - European Operations of Ryder Truck
Rental, Ltd.
Ted A. Jurkuta is Senior Vice President and Chief Information Officer for
the Company, a position he assumed in January, 1998. Prior to his role with the
Company, Mr. Jurkuta served as Senior Vice President, Global Information
Management for American Airlines/The SABRE Group. From 1995 to 1996, Mr.
Jurkuta held the position of Senior Vice President, SABRE Architecture for
American Airlines/The SABRE Group, and from 1992 to 1995, Mr. Jurkuta served as
Senior Vice President, Data Center Services, Vice President, SABRE Group; and
Managing Director, SABRE Decision Technology for American Airlines/The SABRE
Group. Prior to his association with American Airlines/The SABRE Group in 1979,
Mr. Jurkuta was associated with Delta Airlines.
Robert W. Grissom, Jr. is currently Senior Vice President, Franchise
Division. Prior to his current role, Mr. Grissom served as Vice President,
Marketing. Mr. Grissom has also held the positions of Vice President, New
Market Development; Region Vice President, Franchise Division; and Region
Manager, Franchise Division.
Paul J. Seymour is presently Vice President, Human Resources for Norrell
Corporation and has served in that capacity since April 1998. Prior to that
time, he was Vice President of Sales Resource Center and Training in the
Company's Sales and Marketing organization. Mr. Seymour joined the Company in
1992 as Region Vice President, Norrell Services. Prior to joining the Company,
Mr. Seymour worked with American Hospital Supply/Baxter Healthcare.
14
<PAGE> 15
PART II
ITEM 5 MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's stock trades on the New York Stock Exchange under the symbol
NRL. The following table sets forth the quarterly sales price for the Company's
stock for the last two fiscal years.
HIGH/LOW STOCK PRICE
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
First Quarter, 1997 $29 7/8 $22
Second Quarter, 1997 $28 7/8 $22 1/2
Third Quarter, 1997 $35 1/4 $24 3/4
Fourth Quarter, 1997 $35 15/16 $27 5/8
First Quarter, 1998 $32 3/4 $15 13/16
Second Quarter, 1998 $24 3/4 $20 3/16
Third Quarter, 1998 $22 13/16 $18 1/2
Fourth Quarter, 1998 $19 1/4 $11 1/8
</TABLE>
At December 28, 1998 there were 311 shareholders of record.
The Company declared a dividend of $.04 per share on its Common Stock in
December, 1996, March, 1997, June, 1997, September, 1997, December, 1997,
March, 1998, June, 1998 and September, 1998 and December, 1998. The Company's
loan agreement restricts the amount available for the payment of dividends to
not more than 40% of the Company's cumulative net income since November 1,
1993.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following Selected Consolidated Financial Data with respect to the
Company's consolidated statements of income for the years ended November 1,
1998, November 2, 1997 and October 27, 1996 and with respect to the Company's
consolidated balance sheets as of November 1, 1998 and November 2, 1997, have
been derived from the Company's Consolidated Financial Statements for such
years which have been audited by Arthur Andersen LLP, and are included
elsewhere herein. The Selected Consolidated Financial Data with respect to the
Company's consolidated statements of income for the years ended October 29,
1995 and October 30, 1994, and with respect to the Company's consolidated
balance sheets as of October 27, 1996, October 29, 1995 and October 30, 1994,
have been derived from the Company's Consolidated Financial Statements for such
years which have been audited by Arthur Andersen LLP. The following data should
be read in conjunction with the Company's Consolidated Financial Statements and
the Notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
15
<PAGE> 16
<TABLE>
<CAPTION>
Fiscal Years
(In thousands, except per share amounts)
November 1, November 2, October 27, October 29, October 30,
1998 1997 (1) 1996 1995 1994
------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 1,410,518 $ 1,300,039 $ 1,013,877 $ 842,360 $ 701,921
Cost of services 1,091,985 1,014,048 795,013 656,517 543,330
------------ ------------ ----------- ----------- -------------
Gross profit 318,533 285,991 218,864 185,843 158,591
Operating expenses 237,007 209,499 169,206 149,745 128,919
Depreciation and amortization 13,339 10,365 5,904 4,261 4,677
Year 2000 Remediation 3,876 -- -- -- --
Non-recurring charges -- 17,700 -- -- --
------------ ------------ ----------- ----------- -------------
Income from operations 64,311 48,427 43,754 31,837 24,995
------------ ------------ ----------- ----------- -------------
Other income (expense)
Recovery of preferred
stock investment -- -- -- -- 5,000
Interest expense (5,102) (6,989) (1,200) (365) (1,956)
Other expense (332) (1,986) (1,485) (1,628) (408)
------------ ------------ ----------- ----------- -------------
(5,434) (8,975) (2,685) (1,993) 2,636
------------ ------------ ----------- ----------- -------------
Income from continuing
operations before income taxes 58,877 39,452 41,069 29,844 27,631
Income taxes 22,078 14,994 15,812 12,518 11,827
------------ ------------ ----------- ----------- -------------
Income from continuing operations 36,799 24,458 25,257 17,326 15,804
Discontinued operations:
(Loss) gain on disposal, net -- -- -- (348) --
Cumulative effect of change in
accounting principle -- -- -- -- 3,414
------------ ------------ ----------- ----------- -------------
Net income $ 36,799 $ 24,458 $ 25,257 $ 16,978 $ 19,218
============ ============ =========== =========== =============
Earnings from continuing operations:
Per basic share $ 1.35 $ 0.99 $ 1.08 $ 0.75 $ 0.73
Per diluted share $ 1.29 $ 0.91 $ 1.00 $ 0.71 $ 0.69
Net income
Per basic share $ 1.35 $ 0.99 $ 1.08 $ 0.74 $ 0.89
Per diluted share $ 1.29 $ 0.91 $ 1.00 $ 0.70 $ 0.84
Shares used in computing basic earnings per share 27,205 24,660 23,408 23,040 21,714
Shares used in computing diluted earnings per share 28,440 26,747 25,344 24,357 22,782
CONSOLIDATED BALANCE SHEET DATA:
Current assets $ 241,760 $ 237,879 $ 167,388 $ 138,495 $ 111,735
Working capital 104,134 113,314 64,590 55,492 46,952
Total assets 509,284 438,844 263,231 182,024 153,243
Long-term debt 92,510 60,129 23,316 2,057 386
Shareholders' equity 230,299 207,206 98,032 72,934 67,266
</TABLE>
(1) Fiscal year included 53 weeks. All other fiscal years included 52 weeks.
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Consolidated Financial Data and the Consolidated Financial Statements of the
Company and related notes thereto appearing elsewhere in this Form 10-K.
RECENT DEVELOPMENTS
ACQUISITIONS
In order to enhance coverage of the Houston, Texas market area, on
December 1, 1997, the Company acquired the assets and certain liabilities of M.
David Lowe Staffing Services, Inc. ("MD Lowe"). MD Lowe is a Houston, Texas
based provider of staffing and permanent placement services. Approximately 85%
of the company's business is the staffing of administrative and professional
positions on a short- to long-term basis. The balance of the business is the
permanent placement of accounting, administrative and information technology
professionals. MD Lowe operates three locations in the Houston, Texas area.
The Company has centralized the management, sales and technical expertise
in its call center service offering through the acquisition of its partners'
interests in two call center service joint ventures. On June 15, 1998, the
Company acquired 100% ownership of CallTask, Inc. ("CallTask") by purchasing
the 49% interest owned by its joint venture partner, Harvard Teleservicing,
L.L.C. CallTask operates call centers in Victoria, Texas, Goliad, Texas and
Yuma, Arizona. On November 1, 1998, the Company acquired 100% ownership of
NorCross Teleservices, Inc. ("NorCross") by purchasing the 49% interest owned
by its joint venture partner, Cross Country Group, L.L.C. NorCross is a call
center engineering and management company that provides customized call center
operations.
During 1998, the Company strengthened its Professional Services through
three strategic acquisitions of information technology companies. On March 31,
1998, the Company acquired the assets and certain liabilities of The Trattner
Network Ltd. ("Trattner"), a privately held information technology company
based in Los Altos, California. Trattner has approximately 300 consultants on
assignment and operates through additional offices in San Francisco, Larkspur,
Walnut Creek and Sacramento, California. On July 11, 1998, the Company acquired
the assets and certain liabilities of W.E. Carson Associates, Inc. ("Carson"),
a privately held information technology consulting firm based in Atlanta,
Georgia. Carson provides information technology services including systems
analysis, programming, testing and technical writing. On August 12, 1998, the
Company acquired all of the stock of FSS International Limited ("FSS"), a
London based financial and information technology ("IT") recruitment and
international search and selection business. FSS operates in three business
groups: Professional Services, primarily permanent and contract recruitment of
accounting and finance staff; Information Technology, primarily search and
selection for senior IT staff and contract staffing; and International Search
and Selection, primarily retained executive search for clients in the United
Kingdom, Europe, North America and emerging markets. In addition to its London
head office and two offices in the United Kingdom, FSS has an office in Sydney,
Australia and an office in South Africa and associates serving clients in 18
countries around the world.
STOCK REPURCHASE
During the fourth quarter of 1998, the Board of Directors authorized the
Company to purchase up to 15% or 3,750,000 shares of the Company's common
stock. The Company purchased 1,261,000 shares of its common stock for an
aggregate price of $16.7 million during its fourth fiscal quarter. The periodic
purchases were made in the open market and were financed through the Company's
debt facilities and normal operating cash flow. Any additional periodic
purchases will either take place in the open market or in privately negotiated
transactions.
GENERAL
The Company is organized into three service groups: Staffing Services,
which provides temporary administrative, teleservices and light industrial
staffing; Professional Services, which provides information technology,
accounting staffing and interim executive staffing; and Outsourcing Services,
which provides administrative services, call center services and human resource
services through contracts in which the Company assumes responsibility for the
results of a client process. The Company's customers are businesses,
professional and service organizations, and
17
<PAGE> 18
government agencies primarily in the United States, Canada, United Kingdom,
Europe, Australia, South Africa and 18 other countries around the world.
Revenue is generally recognized upon the performance of services. Certain
services are performed under long-term contracts and revenue from these
contracts is recognized by the percentage-of-completion method.
A portion of the Company's revenues is attributable to franchised
operations. Employees and customers of the franchised operations are employees
and customers of the Company. The Company includes such revenues and related
direct costs in its revenues and cost of services, respectively. The net
distribution paid to franchisees is based upon a percentage of the gross profit
generated and is included in the Company's selling, general and administrative
expenses.
The fiscal year ended November 1, 1998 is referred to as "1998", the
fiscal year ended November 2, 1997 is referred to as "1997" and the fiscal year
ended October 27, 1996 is referred to as "1996".
RESULTS OF OPERATIONS
The following table sets forth certain statement of income items as a
percentage of revenues for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 (1) 1996
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of services 77.4 78.0 78.4
- - ------------------------------------------------------------------------------------------------------
Gross profit 22.6 22.0 21.6
Operating expenses 16.8 16.1 16.7
Year 2000 remediation 0.3 -- --
Depreciation and amortization 0.9 0.8 0.6
Non-recurring charges -- 1.4 --
- - ------------------------------------------------------------------------------------------------------
Income from operations 4.6 3.7 4.3
Interest expense (0.4) (0.5) (0.1)
Other expense -- (0.2) (0.1)
- - ------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 4.2 3.0 4.1
Income tax expense 1.6 1.1 1.6
- - ------------------------------------------------------------------------------------------------------
Net income 2.6 1.9 2.5
- - ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Fiscal year included 53 weeks.
The Company operates on a 52 - 53 week fiscal calendar. A 53rd week occurs
in one of every 5 or 6 fiscal years depending on the timing of leap years. The
1997 fiscal year included 53 weeks compared to 52 weeks for the 1998 and 1996
fiscal years. For comparative purposes, financial results included in the
following table exclude the 53rd week and non-recurring charges from fiscal
1997 and the Year 2000 remediation costs from fiscal 1998.
18
<PAGE> 19
<TABLE>
<CAPTION>
Adjusted Adjusted
1998 (1) 1997 (2) 1996
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(In thousands)
Revenues $1,410,518 $1,275,051 $1,013,877
Cost of services 1,091,985 994,279 795,013
- - -----------------------------------------------------------------------------------------------------------------
Gross profit 318,533 280,772 218,864
Operating expenses 237,007 206,526 169,206
Depreciation and amortization 13,339 10,365 5,904
- - -----------------------------------------------------------------------------------------------------------------
Income from operations 68,187 63,881 43,754
Interest expense (5,102) (6,960) (1,200)
Other expense (332) (1,897) (1,485)
- - -----------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 62,753 55,024 41,069
Income tax expense 23,532 20,911 15,812
- - -----------------------------------------------------------------------------------------------------------------
Net income $ 39,221 $ 34,113 $ 25,257
- - -----------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 1.38 $ 1.28 $ 1.00
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the impact of Year 2000 remediation costs.
(2) Excludes the impact of the 53rd week and non-recurring charges.
YEAR ENDED NOVEMBER 1, 1998 COMPARED TO YEAR ENDED NOVEMBER 2, 1997
Revenues increased 8.5%, or $110.5 million, to $1.4 billion in 1998. If
revenues for the 53rd week were excluded, revenues would have increased 10.6%
or $135.5 million. Revenue mix has shifted in 1998, with a decline in Staffing
Services and a corresponding increase in Professional Services revenue. Revenue
by business group is as follows:
<TABLE>
<CAPTION>
Business Group 1998 % of Consolidated Revenue 1997 % of Consolidated Revenue (1)
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Staffing Services 64.6% 68.1%
Outsourcing Services 19.2% 19.6%
Professional Services 16.2% 12.3%
- - ------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the impact of the 53rd week.
Staffing Services revenues grew 2.8% to $911.6 million. Staffing Services
volume, as measured by hours that staffing employees worked, increased 0.2% and
rates rose 4.5% compared to increases of 14.7% and 3.1%, respectively, for the
1997 period. Staffing Services volume growth was impacted primarily by three
factors, (1) difficulty in recruiting large volumes of employees due to tight
labor markets, (2) temporary sales coverage challenges resulting from the
substantially complete organizational realignment, and (3) the prior year
impact of a major call center staffing project which was completed in 1997. The
Company has recently implemented specific activities to enhance its recruiting
function and augment its sales and service delivery functions via a central
management focus and target market area coverage. Staffing Services includes
the results of MD Lowe which was acquired in December 1997. Outsourcing
Services revenues grew 6.2% to $270.2 million. Outsourcing Services revenues
from customers other than IBM increased 6.4% or $6.0 million from 1997, while
revenues from IBM increased $9.7 million or 6.0%. Professional Services
revenues were $228.7 million in 1998 compared to $159.0 million in 1997, a
43.8% increase. The Company strengthened its Professional Services Group
through the acquisitions of Comtex Information Systems, Inc. ("Comtex") in
January 1997, IMCOR, Inc. ("IMCOR") in October 1997, Trattner in March 1998,
Carson in July 1998 and FSS in August 1998. If revenues for the 53rd week were
excluded from 1997, consolidated 1998 revenues would have increased $135.5
million or 10.6% over 1997 revenues. Staffing Services, Outsourcing Services
and Professional Services revenues would have grown $43.8 million, $20.6
million and $71.0 million and 5.0%, 8.3% and 45.1%, respectively.
19
<PAGE> 20
Gross profit increased 11.4%, or $32.5 million, to $318.5 million in 1998.
Gross margin (gross profit as a percent of revenues) increased from 22.0% in
the 1997 period to 22.6% in the 1998 period. Consolidated gross margin
improvement resulted primarily from the business mix shift to the higher margin
Professional Services business group. Staffing Services gross margin decreased
slightly from 21.4% in 1997 to 21.2% in 1998. Staffing Services includes the
results of MD Lowe which was acquired in December 1997. Outsourcing Services
gross margin remained relatively flat at 18.3% in 1997 and 18.2% in 1998.
Professional Services gross margin increased from 31.4% in the 1997 period to
33.2% in the 1998 period. Margins increased as a result of adding higher margin
information technology consulting services and high end financial staffing
services. These additions included the acquisitions of Comtex, IMCOR, Trattner,
Carson and FSS. If gross profit for the 53rd week was excluded for 1997,
consolidated gross profit would have increased $37.8 million. Staffing
Services, Outsourcing Services and Professional Services gross profit would
have increased $8.1 million, $3.3 million, and $26.4 million, respectively.
Operating expenses increased 13.1%, or $27.5 million, primarily as a result
of the incremental operating costs associated with the acquisitions of Comtex,
IMCOR, MD Lowe, Trattner, Carson and FSS. The Company also added costs in the
1998 period to support organic growth and to provide increased client support.
During the 1998 period, the Financial Accounting Standards Board Emerging Issues
Task Force issued an accounting clarification stating that companies need
to expense as incurred costs associated with business process reengineering. The
Company incurred $1.2 million of incremental costs for business process
reengineering work. Operating expenses, as a percentage of revenues, increased
from 16.1% in the 1997 period to 16.8% in the 1998 period. The Company incurred
costs of $3.9 million in the 1998 period related to the Year 2000 remediation
project (see "Year 2000 Issues" below). Depreciation and amortization expense
increased $3.0 million, or 28.7%, from the 1997 period due to increased
investment in desktop computers to support management information and field
operating systems, MIS development and goodwill from acquisitions. If 1997
operating expenses associated with the 53rd week were excluded, operating
expenses would have increased $30.5 million or 14.8%.
Interest expense decreased from $7.0 million in the 1997 period to $5.1
million in the 1998 period. This decrease resulted from the net effect of the
proceeds from the Company's July 28, 1997 stock offering and positive operating
cash flow in the 1998 period reduced by borrowings to fund the acquisitions
discussed above. See "Liquidity and Capital Resources" below.
Other expense decreased from $2.0 million in the 1997 period to $332,000
in the 1998 period. The 1997 period expense included the Company's share of
losses from its 50% ownership in a joint venture formed in October 1995 to
provide administrative outsourcing for health care facilities. This joint
venture was terminated in the fiscal fourth quarter of 1997.
The effective income tax rate declined from 38.0% in 1997 to 37.5% in 1998
as a result of proportionately lower non-deductible goodwill in the 1998 period
and reduced state income taxes.
Net income rose from $24.5 million in 1997 to $36.8 million in 1998, a
50.5% increase. Diluted earnings per share increased to $1.29 in 1998 from
$0.91 in 1997. Year 2000 remediation expense totaled $3.9 million in 1998. If
these costs had been excluded from the 1998 period, the net income and diluted
earnings per share would have been $39.2 million and $1.38, respectively. The
1997 net income included 53rd week revenues and costs and non-recurring
charges. Excluding the impact of the 53rd week and the non-recurring charges,
the 1997 period net income and diluted earnings per share would have been $34.1
million and 1.28, respectively. The increase in net income and diluted earnings
per share from 1997 to 1998 would have been $ 5.1 million and $ 0.10,
respectively.
YEAR ENDED NOVEMBER 2, 1997 COMPARED TO YEAR ENDED OCTOBER 27, 1996
Revenues increased 28.2%, or $286.2 million to $1.3 billion in 1997. If
revenues for the 53rd week were excluded, revenues would have increased 25.8%
or $261.2 million. Revenue by business group is as follows:
<TABLE>
<CAPTION>
Business Group 1997 % of Consolidated Revenue (1) 1996 % of Consolidated Revenue
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Staffing Services 68.1% 72.6%
Outsourcing Services 19.6% 21.0%
Professional Services 12.3% 6.4%
- - -------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the impact of the 53rd week.
20
<PAGE> 21
Staffing Services revenues grew 20.4% to $886.5 million. Staffing Services
volume, as measured by hours that staffing employees worked, increased 14.7%
and rates rose 3.1% compared to a volume increase of 13.1% and a rate increase
of 5.0% for 1996. Outsourcing Services revenues grew 19.8% to $254.5 million.
Outsourcing Services revenues from customers other than IBM increased $28.9
million from 1996 to $93.6 million. Included in Outsourcing Services revenues
was the recognition of $1.9 million and $2.2 million in 1997 and 1996,
respectively, of deferred gain from the return in January 1995 of Company stock
held by IBM. Professional Services revenues were $159.0 million in 1997
compared to $65.1 million in 1996, a 142.2% increase. The Company added to its
Professional Services Group through the acquisitions of Analytical
Technologies, Inc. and ANATEC Canada, Inc. (collectively "ANATEC") in July
1996, American Technical Resources, Inc. ("ATR") in August 1996, Accounting
Resources, Inc. ("ARI") in November 1996 and Comtex in January 1997. The
accompanying financial statements include the results of operations of Comtex,
ANATEC, ARI and IMCOR from the acquisition dates. ATR was accounted for as a
pooling of interests and, accordingly, the accompanying financial statements
include the results of ATR for all periods presented. If revenues for the 53rd
week were excluded, consolidated 1997 revenues would have increased $261.2
million or 25.8%. Staffing Services, Outsourcing Services and Professional
Services revenues would have grown $131.5 million, $37.1 million and $92.6
million and 17.9%, 17.5% and 142.2%, respectively.
Gross profit increased 30.7%, or $67.1 million, to $286.0 million in 1997.
Gross margin (gross profit as a percent of revenues) increased from 21.6% in
1996 to 22.0% in 1997. Staffing Services gross margin decreased from 22.1% in
1996 to 21.4% in 1997. The decline was due to volume increases in certain lower
margin accounts. Outsourcing Services gross margin increased from 18.1% in 1996
to 18.3% in 1997. Professional Services gross margin increased from 27.6% in
1996 to 31.4% in 1997 due principally to the acquisition of Comtex.
Professional Services gross profit also included the results of ANATEC, ARI and
IMCOR from the acquisition dates; and ATR for all periods presented. If gross
profit for the 53rd week was excluded, consolidated gross profit would have
increased $61.9 million. Staffing Services, Outsourcing Services and
Professional Services gross profit would have increased $22.7 million, $7.5
million, and $31.7 million, respectively.
Operating expenses increased 23.8%, or $40.3 million. The operating
expense increase included $5.0 million of higher franchise commissions
associated with increased franchise revenues, $26.5 million of increased
personnel and personnel related costs associated with internal growth, and $6.0
million of increased costs associated with the Comtex, ARI, IMCOR, ANATEC and
ATR acquisitions. If operating expenses associated with the 53rd week were
excluded, operating expenses would have increased $37.3 million or 22.1%.
Depreciation and amortization expense increased 75.6% or $4.5 million due to
increased investment in management information systems and amortization of
goodwill from acquisitions.
Interest expense increased from $1.2 million in 1996 to $7.0 million in
1997 as a result of borrowings to fund the acquisitions discussed above;
spending on MIS development; additions to property and equipment; and the
increased cost associated with carrying a higher trade accounts receivable
balance (see Liquidity and Capital Resources), net of the proceeds from the
Company's July 28, 1997 stock offering.
Other expense increased from $1.5 million in 1996 to $2.0 million in 1997.
Included in other expense is the Company's share of losses from its 50%
ownership in a joint venture formed in October 1995 to provide administrative
outsourcing for health care facilities. The losses totaled $2.0 million in 1997
and $830,000 in 1996. The termination of this business is discussed above.
The effective income tax rate declined from 38.5% in 1996 to 38.0% in 1997
primarily as a result of the deductibility of non-qualified stock option
exercises in 1997.
21
<PAGE> 22
Diluted earnings per share declined to $ 0.91 in 1997 from $1.00 in 1996.
Excluding the impact of the 53rd week and the 1997 non-recurring charges, 1997
diluted earnings per share would have been $1.28, a 28.0% increase over 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term liquidity depends primarily upon its level of net
income, accounts receivable, accounts payable and accrued expenses. The nature
of the Company's business requires payment of wages to its temporary personnel
on a weekly basis and to its other employees on a bi-weekly basis while
payments from its clients are received on average 30 to 60 days after billing.
As a result of this timing difference, the Company's working capital
requirements increase proportionately with its revenue increases. The Company
has no binding commitments for capital expenditures during the next fiscal
year.
With the assistance of outside consultants, the Company has completed an
information systems plan to address the Company's long-term business needs. The
plan includes three major initiatives: 1) Development of a new weekly payroll
system which will enhance capacity, flexibility and speed to support
anticipated volumes, 2) Replacement of the highly customized billing system
with a version more closely resembling the vendor delivered software in order
to reduce cost and improve efficiency of applying vendor upgrades through
business process improvements, and 3) Continue the roll out of the improved
branch office order entry system. Anticipated capital spending for the payroll
and branch office systems projects during fiscal 1999 is in the range of $9
million to $12 million. The new weekly payroll system is expected to be
complete in the first fiscal quarter of 1999. The branch office order entry
system will be implemented in a phased roll out approach and is expected to be
complete in the third fiscal quarter of 1999. The remaining costs related to
the billing system replacement will be absorbed in operating expenses and are
not expected to significantly impact the Company's normal operating costs as a
percentage of revenue.
See Note 11 of Notes to Consolidated Financial Statements regarding
commitments under the Company's headquarters office building lease and
information systems contract. The Company's primary sources of liquidity are
operating cash flows and credit facilities totaling $220.0 million. See Note 6
of Notes to Consolidated Financial Statements.
Cash provided by operations was $63.0 million in 1998 compared to cash
used of $1.4 million in 1997. The 1998 period included a decrease of $9.6
million in trade accounts receivable compared to an increase of $60.7 million
in 1997. The 1998 decrease was due principally to a decline in days sales
outstanding. During the 1998 period, cash provided by operating activities was
partially offset by a decrease in accounts payable and accrued expenses (a
decrease in cash) of $2.4 million compared to an increase of $10.5 million in
1997. The change year over year was the result of timing of payroll and other
operating expense payments.
Investing activities used cash of $87.9 million in 1998 compared to cash
used of $121.0 million in 1997. The purchases of MD Lowe in December 1997,
Trattner in March 1998, CallTask in June 1998, Carson in July 1998 and FSS in
August 1998 along with the contractual payments related to the Comtex and
Orlando franchise acquisitions resulted in cash uses of $66.7 million in 1998.
The October 1997 purchases of IMCOR and the Orlando franchise, the January 1997
purchase of Comtex, the November 1996 purchase of ARI and the final payment
associated with the July 1996 acquisition of ANATEC resulted in cash uses of
$87.7 million in 1997. The investing activities for 1998 and 1997 included MIS
development costs of $6.9 million and $17.7 million, respectively.
Financing activities provided cash of $28.0 million in 1998 compared to
$120.2 million in 1997. Net proceeds from the issuance of long-term debt
provided cash in 1998 of $43.7 million compared to cash provided of $39.9
million in 1997. The 1998 debt included the funding of the 1998 acquisitions
discussed above. Cash used in 1998 for the acquisition of treasury stock
totaled $17.2 million, which includes the $16.7 million stock repurchase
discussed above, compared to a use of $520,000 in 1997. The 1997 period cash
provided from financing activities included the receipt of proceeds from the
July 28,1997 stock offering of $76.1 million.
The Company's long-term liquidity is also dependent upon cash flows from
operations and borrowing under its credit facilities. The Company has
historically been able to obtain debt financing adequate to fund its
operations. As described in Note 6 to the Notes to Consolidated Financial
Statements, the Company has an unsecured revolving credit facility of $150.0
million which extends until September 30, 2001, and $70.0 million of unsecured
bank lines of
22
<PAGE> 23
credit. Management believes the Company's relationships with its lenders are
good and that it will be able to obtain any required financing upon maturity of
its existing credit facilities.
The Company has no long-term commitments other than those described in
Note 11 to the Notes to Consolidated Financial Statements and contingent
payments related to certain acquisitions. In addition to the initial cash
purchase price paid at closing for the IMCOR, Trattner, Orlando Franchise,
Comtex and FSS acquisitions, the sellers have the right to receive contingent
payments based on their achieving a specified level of earnings, with final
payment dates between December 1998 and July 2001. The Company does not expect
these contingent payments to have a material impact on its operations.
The Company believes that funds provided from operations and available
borrowings under its credit facilities will be sufficient to meet its needs for
working capital and capital expenditures at least through the end of the coming
fiscal year.
NON-RECURRING CHARGES
During the fourth quarter of 1997, the Company recorded a non-cash,
accounting charge of $17.7 million, before tax, of which, $15.0 million was
related to the impairment of certain MIS development costs. The MIS development
cost write-down resulted from an examination of the Company's payroll and
billing systems. Based on a review made in conjunction with outside
consultants, the system architecture of the weekly payroll system lacked the
required capacity, flexibility and speed to support volumes anticipated over
the next five years. Additionally, as a consequence of billing system
customizations required to meet the Company's customer and financial reporting
requirements, and the resulting difficulty and cost to upgrade the billing
system, the system must be replaced versus upgraded. See "Liquidity and Capital
Resources" above for a discussion of the Company's information systems plan to
address its long-term business needs. In the interim, the Company expects no
disruption in normal business. The recognition of this impairment was in
accordance with the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The remaining $2.7 million charge resulted from the
termination of two businesses that did not meet the Company's expectations: a
joint venture formed in October 1994 of which the Company has a 50% interest
and a Staffing Services business acquired in April 1994 which provided
executive training. This charge was equal to the Company's investment in the
joint venture, the acquired goodwill in the Staffing Services business, and
estimated costs to terminate operations of each business.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Standard No. 130, "Reporting Comprehensive Income," and Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These standards are effective for fiscal years beginning after
December 15, 1997. See Note 1 of Notes to Consolidated Financial Statements
where these Statements are discussed.
In February 1998, the FASB issued Standard No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." This Statement
is effective for fiscal years beginning after December 15, 1997. See Note 1 of
Notes to Consolidated Financial Statements where this Statement is discussed.
In June 1998, the FASB issued Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement is effective for fiscal
years beginning after June 15, 1999. See Note 1 of Notes to Consolidated
Financial Statements where this Statement is discussed.
INFLATION
The effects of inflation were not significant to the Company's operations
during 1998, 1997, or 1996.
23
<PAGE> 24
YEAR 2000 ISSUES
BACKGROUND
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations. If not corrected, many computer applications could
fail or create erroneous results.
STATE OF READINESS
The Company has developed a comprehensive Year 2000 project plan which
addresses both technological and non-IT systems, including embedded systems for
all business units. The Company has designated a Year 2000 Core Team to lead
efforts using a multi-phase approach. Both internal and external resources are
being employed to identify, correct and test systems to achieve Year 2000
compliance. The Company is also reviewing the Year 2000 readiness of third
parties which provide goods or services essential to the Company's operations.
The plan consists of seven phases. The initial phases, Awareness,
Inventory and Assessment are well underway and nearing completion, with the
exception of the Awareness aspects which continue through the life of the
project. The Strategy phase, which defines the remediation strategy, is
underway and is projected to be completed during the Company's first fiscal
quarter of 1999. The Remediation phase, which implements strategies to resolve
non-compliant date processes has begun and will continue as each product,
service or process has an identified strategy, and is projected to be completed
in the Company's second and third fiscal quarters of 1999. The Testing phase
spans the project and is anticipated to include up to 60% of the total effort
to achieve Year 2000 readiness. Testing has begun and mission critical system
testing is expected to be completed by the end of June 1999. The Deployment
phase includes the installation of compliant mission critical hardware and
software components into the production environment. This phase includes
training to the end-user community and will commence after each product,
service or process solution has been thoroughly tested and accepted by the
business user. With regard to third parties, the Company is communicating with
key customers, suppliers and other business partners to establish and monitor
their levels of Year 2000 preparedness. Our Year 2000 plan is subject to
modification and may be revised periodically as further information is
developed. The Company currently believes that its plan will be completed in
all critical respects without any material adverse effects on the Company.
ESTIMATED COSTS
Cost estimates are expected to be in the range of $18 million to $25
million of which approximately $3.9 million has been incurred and expensed.
Cost estimates are continually being reviewed and adjusted, if appropriate. The
Company expects the majority of these costs to be incurred in fiscal 1999. The
Company believes a portion of the Company's Year 2000 costs will be funded by
the reallocation of existing resources and thus not all Year 2000 costs are
expected to be incremental. The Company's Year 2000 project costs are not
expected to have a material impact on its liquidity or capital resources.
The actual costs to be incurred by the Company will depend on a number of
factors which cannot be accurately predicted, including the extent and
difficulty of the remediation and other work to be done, the availability and
cost of resources needed to complete tasks and the extent of testing required
to demonstrate Year 2000 compliance.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
Based on current information, the Company believes that the Year 2000
problem will not have a material adverse effect on the Company, its business or
its financial condition. There can, however, be no assurances that Year 2000
remediation by the Company or third parties will be properly and timely
completed, and failure to do so could have a material adverse effect on the
Company, its business and its financial condition. The Company cannot predict
the actual effects to it of the Year 2000 problem, which depends on numerous
uncertainties such as: (i) the factors listed above under Estimated Costs; (ii)
whether significant third parties properly and timely address the Year 2000
issue; (iii) whether broad-based or systemic economic failures may occur, and
the severity and duration of such failures of general transportation systems,
loss of utility and/or telecommunications services, and errors or failures in
financial transactions
24
<PAGE> 25
or payment processing systems; and (iv) whether the Company becomes the subject
of litigation or other proceedings regarding any Year 2000-related events and
the outcome of any such litigation or proceedings.
At this time, the most reasonably likely worst case scenario would be the
failure of the Company's systems and/or those of its third party suppliers.
While this would seem to be an unlikely scenario, such a failure could result
in a significant temporary adverse impact to the Company's operations,
including interruption or suspension of operations.
YEAR 2000 CONTINGENCY PLANS
The Company is reviewing existing contingency plans for potential
modification to address specific Year 2000 issues. The Company's key
operational systems, which include, but are not limited to payroll, billing,
and accounts receivable, are also being reviewed and strengthened to address
business continuity requirements. Business continuity plans will include the
development of back-up processes that would be implemented in the event of
system failures, for example, the issuance of manual checks at local levels in
the event of a payroll system failure. The contingency planning process will
continue as modifications are made and as the status of third party readiness
becomes better known.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company carries floating rate debt and thus is exposed to the impact
of interest rate changes. The Company mitigates this exposure through the use
of interest rate swaps which allow it to manage its mix of variable-rate and
fixed-rate debt. The Company does not enter into contracts for trading purposes
and does not use leveraged instruments. The information below summarizes the
Company's market risk associated with debt obligations and other significant
financial instruments as of November 1, 1998. The Company estimates that the
carrying value of debt approximates their fair values when compared to
instruments of similar type, terms and maturity. The information presented
below should be read in conjunction with Note 6 to the Notes to Consolidated
Financial Statements. For debt obligations, the table presents principal cash
flows and related interest rates by expected fiscal year of maturity. Variable
interest rates represent the weighted-average rates of the portfolio at
November 1, 1998. For interest rate swaps, the table presents the notional
amounts and related weighted-average interest rates by fiscal year of maturity.
<TABLE>
<CAPTION>
Expected Fiscal Year of Maturity
- - ------------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 Total Fair Value
- - ------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Debt:
Fixed Rate $ 8,470 $ 732 -- -- $ 9,202 $ 9,202
Average Interest Rate 6.5% 6.5% -- -- 6.5%
Variable Rate $24,220 $ 1,778 $90,000 -- $115,998 $115,998
Average Interest Rate 5.9% 6.3% 5.7% -- 5.8%
- - ------------------------------------------------------------------------------------------------------------------------
Interest Rate Swaps:
Receive variable/pay fixed -- -- -- $60,000 $ 60,000 $ (3,062)
Average pay rate -- -- -- 6.4% 6.4%
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
The foregoing section contains forward-looking statements, including
statements regarding, among other matters: (i) the Company's plans, intentions
and expectations with respect to its future prospects, including its business
and growth strategies and its relationships with its major clients; (ii)
industry trends, competitive conditions and client preferences; (iii) expected
capital expenditures to be made in the future, including investments in its
computerized
25
<PAGE> 26
management information systems; (iv) the sufficiency of funds from operations
and available borrowings to meet the Company's working capital and capital
expenditure needs for fiscal 1999; (v) the Company's plans, beliefs and
expectations with respect to changes which have been or will be made to its
computerized management information systems, including modifications to its
payroll and billing systems and other modifications to address Year 2000
issues; and (vi) resolution of pending litigation without material adverse
effect on the Company. This notice is intended to take advantage of the " safe
harbor" provided by the Private Securities Litigation Reform Act of 1995 with
respect to such forward-looking statements. These forward-looking statements
involve a number of risks and uncertainties. Among others, factors that could
cause actual results to differ materially from the Company's beliefs or
expectations are the following: industry trends and trends in the general
economy or in industries in which the Company's major clients operate;
competitive factors in the markets in which the Company or its major clients
operate; the loss or reduction of revenues generated by the Company's major
clients; the variability of quarterly results and seasonality of the Company's
business; the dependence on key personnel who have been hired or retained by
the Company; changes in regulatory requirements which are applicable to the
Company's business; the availability of strategic acquisitions or joint venture
partners; and other factors referenced herein or from time to time in this
document.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item 7A is set forth under "Quantitative
and Qualitative Disclosure about Market Risk" in Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of Operations)
above.
26
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NORRELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
November 1, 1998 November 2, 1997
---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 9,871 $ 6,678
Accounts receivable trade,
less allowances of $7,351 in 1998
and $6,497 in 1997 220,573 215,463
Prepaid expenses 4,816 2,915
Other 6,500 12,823
---------------- ----------------
Total current assets 241,760 237,879
---------------- ----------------
PROPERTY AND EQUIPMENT, less
accumulated depreciation 27,923 19,759
NONCURRENT DEFERRED INCOME TAXES 14,657 12,690
OTHER ASSETS
Goodwill and other intangibles, net of amortization 188,265 136,358
MIS development costs, net of amortization 23,973 19,486
Investments and other assets 12,706 12,672
---------------- ----------------
Total other assets 224,944 168,516
---------------- ----------------
TOTAL ASSETS $ 509,284 $ 438,844
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 32,690 $ 12,881
Accounts payable 13,066 12,390
Accrued expenses 87,365 90,515
Deferred revenue and gain 4,505 8,779
---------------- ----------------
Total current liabilities 137,626 124,565
LONG-TERM DEBT, less current maturities 92,510 60,129
LONG-TERM DEFERRED GAIN 8,495 9,983
LONG-TERM ACCRUED EXPENSES 40,354 36,961
---------------- ----------------
Total liabilities 278,985 231,638
---------------- ----------------
SHAREHOLDERS' EQUITY
Common stock, stated value $.01 per share;
50,000,000 shares authorized, with 27,550,286 shares issued
and 26,252,554 shares outstanding in 1998 and 26,938,195
shares issued and 26,903,738 shares outstanding in 1997 276 269
Treasury stock, at cost; 1,297,732 shares in 1998
and 34,457 shares in 1997 (17,438) (1,062)
Additional paid-in capital 139,772 133,220
Notes receivable from officers and employees (80) (125)
Cumulative foreign currency translation adjustments 442 --
Retained earnings 107,327 74,904
---------------- ----------------
Total shareholders' equity 230,299 207,206
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 509,284 $ 438,844
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 28
NORRELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED NOVEMBER 1, 1998, NOVEMBER 2, 1997 AND OCTOBER 27, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1998 1997(1) 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 1,410,518 $ 1,300,039 $ 1,013,877
COST OF SERVICES 1,091,985 1,014,048 795,013
----------- ----------- -----------
Gross profit 318,533 285,991 218,864
OPERATING EXPENSES 237,007 209,499 169,206
DEPRECIATION AND AMORTIZATION 13,339 10,365 5,904
YEAR 2000 REMEDIATION 3,876 -- --
NON-RECURRING CHARGES -- 17,700 --
----------- ----------- -----------
Income from operations 64,311 48,427 43,754
INTEREST EXPENSE (5,102) (6,989) (1,200)
OTHER EXPENSE (332) (1,986) (1,485)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 58,877 39,452 41,069
INCOME TAXES 22,078 14,994 15,812
----------- ----------- -----------
NET INCOME $ 36,799 $ 24,458 $ 25,257
=========== =========== ===========
PER COMMON SHARE (BASIC):
BASIC EARNINGS PER COMMON SHARE $ 1.35 $ 0.99 $ 1.08
=========== =========== ===========
SHARES USED IN COMPUTING BASIC
EARNINGS PER SHARE 27,205 24,660 23,408
=========== =========== ===========
PER COMMON SHARE (DILUTED):
DILUTED EARNINGS PER COMMON SHARE $ 1.29 $ 0.91 $ 1.00
=========== =========== ===========
SHARES USED IN COMPUTING DILUTED
EARNINGS PER SHARE 28,440 26,747 25,344
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Fiscal year included 53 weeks.
28
<PAGE> 29
NORRELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED NOVEMBER 1, 1998, NOVEMBER 2, 1997 AND OCTOBER 27, 1996
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Cumulative
Notes Foreign
Common Stock Additional Receivable Currency
------------------ Treasury Paid-In From Officers Translation Retained
Shares Amount Stock Capital and Employees Adjustments Earnings
-------- -------- ---------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE at October 29, 1995 23,214 $ 232 $ (476) $ 41,382 $ (398) $ - $ 32,194
Stock options exercised 337 4 436 1,213 - - -
Common stock issued 41 - - 563 (40) - -
Dividends on common stock
($0.14 per share) - - - - - - (3,065)
Issuance of options for discounted
stock option plan - - - 938 - - -
Purchase of treasury stock (26) - (535) - - - -
Decrease in receivable from employees - - - - 327 - -
Net income - - - - - - 25,257
-------- -------- ---------- ---------- ------------- ----------- ---------
BALANCE at October 27, 1996 23,566 $ 236 $ (575) $ 44,096 $ (111) $ - $ 54,386
======== ======== ========== ========== ============= =========== =========
Stock options exercised, including
related tax benefits 614 6 1,159 4,773 - - -
Stock offering proceeds 2,500 25 - 76,091 - - -
Other common stock issued 284 2 19 7,192 (40) - -
Dividends on common stock
($0.16 per share) - - - - - - (3,940)
Issuance of options for discounted
stock option plan - - - 1,068 - - -
Purchase of treasury stock (60) - (1,665) - - - -
Decrease in receivable from employees - - - - 26 - -
Net income - - - - - - 24,458
-------- -------- ---------- ---------- ------------- ----------- ---------
BALANCE at November 2, 1997 (1) 26,904 $ 269 $ (1,062) $ 133,220 $ (125) $ - $ 74,904
======== ======== ========== ========== ============= =========== =========
Stock options exercised, including
related tax benefits 493 4 1,686 2,432 - - -
Other common stock issued 182 3 - 2,885 - - -
Dividends on common stock
($0.16 per share) - - - - - - (4,376)
Issuance of options for discounted
stock option plan - - - 1,235 - - -
Purchase of treasury stock (1,326) - (18,062) - - - -
Decrease in receivable from employees - - - - 45 - -
Foreign currency translation adjustment - - - - - 442 -
Net income - - - - - - 36,799
-------- -------- ---------- ---------- ------------- ----------- ---------
BALANCE at November 1, 1998 26,253 $ 276 $ (17,438) $ 139,772 $ (80) $ 442 $ 107,327
======== ======== ========== ========== ============= =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Fiscal year included 53 weeks.
29
<PAGE> 30
NORRELL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 1, 1998, NOVEMBER 2, 1997 AND OCTOBER 27, 1996
(In thousands)
<TABLE>
<CAPTION>
1998 1997(1) 1996
-------- ---------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 36,799 $ 24,458 $ 25,257
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization - operating expenses 13,339 10,365 5,904
Depreciation and amortization - cost of services/other expenses 1,380 667 409
Gain on retirement of common stock (1,884) (1,884) (2,177)
Non-recurring charge -- 17,700 --
Provision for doubtful accounts 2,436 1,095 2,315
Deferred income taxes (874) (8,114) 173
Deferred gain on sale of building (1,488) (1,488) 12,967
Long-term accrued expenses 3,659 3,989 2,304
Other 1,102 4,071 106
Change in current assets and current liabilities:
Accounts receivable, trade 9,628 (60,748) (20,235)
Accounts payable (735) (7,434) 3,025
Accrued expenses (1,628) 17,983 7,759
Other 1,313 (2,059) 174
-------- --------- --------
Net cash provided by (used in) operating activities 63,047 (1,399) 37,981
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of acquisitions, net of cash acquired (66,733) (87,662) (32,963)
Additions to property and equipment, net (13,032) (10,902) (6,880)
Increase in MIS development costs, net (6,908) (17,695) (14,741)
Increase in investments and other noncurrent assets (1,164) (3,361) (2,046)
Increase in goodwill and other intangibles, net (80) (1,344) (270)
-------- --------- --------
Net cash used in investing activities (87,917) (120,964) (56,900)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 81,419 272,827 87,886
Repayments of long-term debt (37,700) (232,924) (64,102)
Acquisition of treasury stock (17,194) (520) (536)
Dividends paid on common stock (4,376) (3,940) (3,065)
Stock option exercises, including related tax benefits 3,845 5,913 1,646
Proceeds from the issuance of common stock 2,007 78,809 851
-------- --------- --------
Net cash provided by financing activities 28,001 120,165 22,680
-------- --------- --------
-------- --------- --------
Effect of exchange rate changes on cash 62 -- --
-------- --------- --------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS 3,193 (2,198) 3,761
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 6,678 8,876 5,115
-------- --------- --------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 9,871 $ 6,678 $ 8,876
======== ========= ========
SUPPLEMENTARY CASH FLOW DISCLOSURES
Cash payments during the period for
Interest $ 4,972 $ 6,340 $ 1,183
Income taxes, net of refunds 18,642 20,828 17,303
Noncash investing and financing activity
Issuance of options to benefit plan 1,238 1,083 938
Exercise of benefit plan stock options (1,423) (1,488) (630)
Note Payable due January 4, 1999 for purchase of minority interest 7,720 -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1) Fiscal year included 53 weeks.
30
<PAGE> 31
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 1, 1998, NOVEMBER 2, 1997, AND OCTOBER 27, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
Basis of Presentation
The consolidated financial statements include the accounts of Norrell
Corporation and its subsidiaries (the "Company"). All material intercompany
accounts and transactions have been eliminated.
Business and Revenue Recognition
The Company operates in one industry segment, providing staffing,
outsourcing and consulting services in the United States, Canada, United
Kingdom, Europe, Australia, South Africa and 18 other countries around the
world.
Revenue is generally recognized upon the performance of services.
Certain services are performed under long-term contracts. Revenue from these
contracts is recognized using the percentage-of-completion method based on the
percentage that incurred costs to date bear to total estimated costs after
giving effect to the most recent estimates of total cost. Losses expected to be
incurred on jobs in process would be charged to income as soon as such losses
are known. Amounts received from customers in excess of revenues recognized to
date are classified as deferred revenues and are included in current
liabilities.
A portion of the Company's revenue is attributable to franchise
operations. Employees and customers of franchise operations are employees and
customers of the Company. The Company includes such revenues and related direct
costs in its revenues and cost of services, respectively. The net distribution
paid to the franchisee is based on a percentage of the gross profit generated
and is included in operating expenses.
Significant Customer Information
For fiscal years 1998 and 1997 one customer accounted for revenues of
12.5% and 13.2%, respectively. For fiscal year 1996, two customers accounted
for 27.6% of revenues.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers
all liquid investments with a maturity of three months or less at the time of
purchase to be cash and short-term investments.
Financial Instruments
Based on pertinent information available to the Company at November 1,
1998, the Company estimates that the carrying value of cash and short-term
investments, investments, current maturities of long-term debt and long-term
debt approximate their fair values when compared to instruments of similar
type, terms and maturity.
Intangible Assets
Intangible assets consist primarily of goodwill associated with
acquired businesses, which is amortized on a straight-line basis over 40 years.
Subsequent to an acquisition, the Company regularly evaluates whether events
and circumstances have occurred that indicate the carrying amount of goodwill
may warrant revision or may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company uses an
estimate of the future undiscounted net cash flows of the related business over
the remaining life of the goodwill in measuring whether the goodwill is
recoverable. Other intangible assets are amortized over two to seven years.
Amortization expense for fiscal years 1998, 1997 and 1996 was $4,640,000,
$3,617,000 and $1,015,000, respectively. Accumulated amortization of
intangibles was $15,277,000 and $11,470,000 at November 1, 1998 and November 2,
1997, respectively.
31
<PAGE> 32
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Management Information Systems ("MIS") Development
During fiscal 1998 and 1997, the Company incurred costs associated
with the purchase and development of management information systems unrelated
to the impact of year 2000 processing issues. These costs are capitalized and
amortized on a straight-line basis over five years. MIS development cost
amortization for 1998 and 1997 was $2,421,000 and $2,464,000 respectively.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of no par
preferred stock. The Board of Directors is authorized to fix relative rights,
preferences and limitations of any unissued series of preferred stock. No
preferred stock was issued or outstanding at November 1, 1998 or November 2,
1997.
Other Income (Expense)
Other income (expense) consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
- - ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Interest income $586 $ 346 $ 481
Equity in loss of joint ventures - (2,026) (803)
Amortization of deferred loan costs and bank fees (1,037) (907) (885)
Loss on disposal of fixed assets (45) (16) (218)
Minority interest (71) 193 (10)
Other, net 235 424 (50)
- - ----------------------------------------------------------------------------------------------------------------------------
Total $ (332) $ (1,986) $ (1,485)
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Earnings Per Share
Earnings per share (EPS) is calculated in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share," issued in
February 1997, which requires the Company to present both basic and diluted EPS
on the face of the income statement. Basic EPS is calculated as income
available to common shareholders divided by the weighted average number of
common shares outstanding during the period. Diluted EPS is calculated to
reflect the potential dilution that would occur if stock options or other
contracts to issue common stock were exercised and resulted in additional
common shares outstanding. The income amount used in the Company's EPS
calculations is the same for both basic and diluted EPS. A reconciliation of
the average outstanding shares used in the two calculations is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- - ----------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Weighted average shares outstanding (basic) 27,205 24,660 23,408
Effect of dilutive stock options 1,235 2,087 1,936
- - ----------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding (diluted) 28,440 26,747 25,344
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
Foreign Currency Translation
Foreign currency activity is reported in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS
No. 52"). SFAS No. 52 generally provides that the assets and liabilities of
foreign operations be translated at the current exchange rates as of the end of
the accounting period and that revenues and expenses be translated using
average exchange rates. The resulting translation adjustments arising from
foreign currency translations are accumulated as a separate component of common
shareholders' equity. The translation adjustment during fiscal 1998 was
$442,000.
32
<PAGE> 33
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Stock Split
On June 4, 1996, the Board of Directors authorized a two-for-one split
of common stock for shareholders of record on June 24, 1996. The stated value
remained at $.01 per share. All references in the accompanying financial
statements to the number of common shares, except shares authorized, and to
per-share amounts have been restated to reflect the stock split. The stated
value of the additional shares of common stock issued in connection with the
stock split has been credited to common stock with the like amount charged to
retained earnings.
Stock Offering
On July 28, 1997, the Company completed the sale of 2,500,000 shares
of its common stock at a public offering price of $32.25 per share. The net
proceeds of $76,116,000 were used to reduce amounts outstanding under the
$150,000,000 revolving credit facility.
Stock Repurchase
During the fourth quarter of 1998, the Company purchased 1,261,000
shares of its common stock for an aggregate price of $16,663,000 million. The
periodic purchases were made in the open market and were financed through the
Company's debt facilities and normal operating cash flow.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997. This
statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. Based on current accounting standards, this new accounting
statement is not expected to have a material impact on the Company's
consolidated financial statements. The Company will adopt this accounting
standard beginning in the first quarter of fiscal 1999.
Also, in June 1997, the FASB issued Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information," effective for fiscal years beginning after December 15, 1997.
This statement requires companies to identify segments consistent with the
manner in which management makes decisions about allocating resources to
segments and measuring their performance. Disclosures for the newly identified
segments are similar to those required under current standards, with the
addition of certain quarterly disclosure requirements. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. The Company will adopt this accounting standard for its
fiscal year ending 1999.
In February 1998, the FASB issued Statement of Financial Accounting
Standard No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," effective for fiscal years beginning after December
15, 1997. As a result of this new pronouncement, the Company will include an
additional footnote disclosure for its non-qualified salary continuation plan
in the financial statements for its fiscal year ending 1999.
In June 1998, the FASB issued Statement of Financial Accounting
Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities," effective for fiscal years beginning after June 15, 1999. This
Statement requires companies to record all derivatives on the balance sheet as
assets and liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for based on
management's intended use of the derivative. The Company plans to adopt this
Statement beginning in fiscal 2000 and does not expect it to have a material
impact on the consolidated financial statements.
33
<PAGE> 34
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," was issued by the American
Institute of Certified Public Accountants in March 1998. It is effective for
fiscal years beginning after December 15, 1998. This SOP provides guidance on
accounting for the costs of computer software developed or obtained for
internal use. The Company plans to adopt this Statement beginning in the fiscal
year 2000 and does not expect it to have a material impact on the consolidated
financial statements.
Use of 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.
Reclassifications
Certain amounts have been reclassified in the 1996 and 1997 financial
statements to conform to the 1998 presentation.
Fiscal Year
The Company operates on a 52 or 53 week fiscal year which resulted in
fiscal year ends of November 1, 1998, November 2, 1997, and October 27, 1996.
The fiscal years ended November 1, 1998 and October 27, 1996 included 52 weeks.
Fiscal year ended November 2, 1997 included 53 weeks.
2. ACQUISITIONS
Effective July 15, 1996, the Company acquired all of the assets and
certain of the liabilities of Analytical Technologies, Inc. and ANATEC Canada,
Inc. (collectively, "ANATEC"). ANATEC is a software services and technology
organization serving primarily Fortune 500 companies in the Midwestern United
States. Services include consulting, project management, software development,
training and software systems integration services. The $25,905,000 excess of
the acquisition cost over fair value of ANATEC's tangible assets has been
allocated to goodwill and is being amortized over 40 years. In addition to the
$27,100,000 paid at closing, ANATEC was paid a contingent payment of $9,200,000
based on its achieving a specified level of gross profit for the 12-month
period ending December 31, 1996. At June 30, 1996, ANATEC had net assets of
$1,469,000.
On August 5, 1996, the Company acquired all of the issued and
outstanding stock of American Technical Resources, Inc. ("ATR") in exchange for
1,000,000 shares of company common stock in a transaction accounted for as a
pooling of interests. ATR is an information technology staffing company that
specializes in providing computer professionals for short and long-term
assignments including contract programming, contract recruiting and payrolling
services. At July 31, 1996, ATR had net assets of $3,224,000. The Company's
financial statements have been restated to include the results of ATR for all
periods presented.
Effective January 2, 1997, the Company acquired all of the outstanding
common and preferred stock and all vested and unvested stock rights of Comtex
Information Systems, Inc. ("Comtex") for $67,000,000 of cash plus stock options
to acquire approximately 141,000 shares of Norrell Corporation Common Stock at
a weighted average exercise price of $4.56 per share. Comtex is a New York
City-based provider of information technology services; including systems
planning and development, organizational consulting related to business
transformation and staff augmentation support. Comtex has locations in New York
City, White Plains, New York and Miami, Florida. The $62,231,000 excess of the
acquisition cost over the fair value of Comtex's tangible assets has been
allocated to goodwill and is being amortized over 40 years. At December 31,
1996, Comtex had net assets of $10,066,000.
34
<PAGE> 35
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. PROPERTY AND EQUIPMENT, INVESTMENTS AND OTHER ASSETS
Property and Equipment
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
November 1, November 2,
1998 1997
- - ------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Leasehold improvements $ 7,323 $ 5,964
Furniture, fixtures and equipment 39,621 26,815
- - ----------------------------------------------------------------------------------------------------------
46,944 32,779
Less accumulated depreciation 19,021 13,020
- - ----------------------------------------------------------------------------------------------------------
Net property and equipment $27,923 $19,759
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
Property and equipment are stated at cost. Depreciation is calculated
on a straight-line basis over the estimated asset lives of three to twelve
years for leasehold improvements and five to ten years for furniture, fixtures
and equipment.
Depreciation expense for fiscal years 1998, 1997 and 1996 was
$7,570,000, $4,892,000, and $4,273,000, respectively.
Investments and Other Assets
Investments consist principally of securities held for employee
benefit plans and are carried at market.
In October 1994, the Company acquired a 50% equity interest in a joint
venture formed for the purpose of providing administrative outsourcing services
for health care facilities. During fiscal years 1997 and 1996, the Company
contributed $2,092,000 and $1,059,000, respectively, for general operating
purposes in accordance with the joint venture agreement. Refer to Note 5, where
the termination of this investment is discussed.
4. ACCRUED EXPENSES
Current and long-term accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
November 1, November 2,
1998 1997
- - -----------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Current:
Accrued wages, salaries and related taxes $55,825 $58,505
Workers' compensation reserve, current portion 8,252 7,292
Other 23,288 24,718
- - ----------------------------------------------------------------------------------------------------------
Total $87,365 $90,515
- - ----------------------------------------------------------------------------------------------------------
Long-term:
Workers' compensation reserve, less current portion 19,778 $17,477
Other 20,576 19,484
- - ----------------------------------------------------------------------------------------------------------
Total $40,354 $36,961
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
The Company self-insures up to specified limits for certain risks
related to workers' compensation liability. The estimated costs of existing and
future claims under the insurance program are accrued as incidents occur based
on historical loss development trends which may be subsequently revised based
on developments relating to such claims.
35
<PAGE> 36
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. NON-RECURRING CHARGES
During the fourth quarter of 1997, the Company recorded a non-cash,
accounting charge of $17,700,000, before tax, of which, $14,980,000 was related
to the impairment of certain MIS development costs. The MIS development cost
write-down resulted from an examination of the Company's payroll and billing
systems. Based on a review made in conjunction with outside consultants, the
system architecture of the weekly payroll system lacked the required capacity,
flexibility and speed to support volumes anticipated over the next five years.
Additionally, as a consequence of billing system customizations required to
meet the Company's customer and financial reporting requirements, and the
resulting difficulty and cost to upgrade the billing system, the system must be
replaced versus upgraded. With the assistance of outside consultants, the
Company has completed an information systems plan to address the Company's
long-term business needs. The plan includes three major initiatives: 1)
Development of a new weekly payroll system which will enhance capacity,
flexibility and speed to support anticipated volumes, 2) Replacement of the
highly customized billing system with a version more closely resembling the
vendor delivered software in order to reduce cost and improve efficiency of
applying vendor upgrades through business process improvements, and 3) Continue
the roll out of the revised branch office order entry system. In the interim,
the Company expects no disruption in normal business. The recognition of this
impairment was in accordance with the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of". The remaining $2.7 million
charge resulted from the termination of two businesses that did not meet the
Company's expectations; a joint venture formed in October 1994 of which the
Company has a 50% interest and a Staffing Services business acquired in April
1994 which provided executive training. This charge was equal to the Company's
investment in the joint venture, the acquired goodwill in the Staffing Services
business, and estimated costs to terminate operations of each business.
6. NOTES PAYABLE AND LONG-TERM DEBT
The Company's debt is summarized as follows:
<TABLE>
<CAPTION>
November 1, November 2,
1998 1997
- - ------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Revolving credit facility, due September 30, 2001,
with varying interest rates, interest payable
quarterly $ 90,000 $ 60,000
Bank lines of credit due in varying installments through
October 31, 1999, with varying interest rates,
interest payable monthly 24,220 12,540
Other notes payable due in various installments through 2000,
with varying interest rates, interest payable at maturity 10,980 470
- - ------------------------------------------------------------------------------------------------
Total 125,200 73,010
Less current maturities 32,690 12,881
- - ------------------------------------------------------------------------------------------------
Total long-term debt $ 92,510 $ 60,129
- - ------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 37
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. NOTES PAYABLE AND LONG-TERM DEBT, CONTINUED
At November 1, 1998, the Company had a $150,000,000 revolving credit
facility expiring September 30, 2001 with a group of commercial banks.
Borrowings are unsecured and bear interest at LIBOR, plus an applicable margin.
The revolving credit facility contains negative and affirmative covenants which
(a) limit additional indebtedness, liens, investments, payment of dividends and
disposition of assets and (b) require maintenance of certain financial ratios.
In addition, four commercial banks make available unsecured lines of credit
that total $70,000,000. Maturities and interest rates on borrowings under these
lines are negotiated at the time such borrowings occur. The Company's policy is
to classify borrowings under the revolving credit facility as long-term debt
since the Company has the ability under the credit agreement, and the intent,
to maintain the obligation for longer than one year.
The Company has also entered into four interest rate swap agreements in
order to manage exposure to fluctuations in interest rates. The difference
between fixed and variable interest amounts calculated by reference to
agreed-upon notional principal amounts is recognized as an adjustment to
interest expense over the life of the swaps. Two of the swap agreements are
each for notional principal amounts of $20,000,000. The remaining two
agreements are for notional principal amounts of $12,000,000 and $8,000,000.
The Company exchanges floating interest rates based on LIBOR for an average
fixed rate of 6.43% at quarterly settlement dates. The swap agreements expire
between November 2001 and January 2002. At November 1, 1998, if the Company had
terminated each of the swap agreements, the Company's cost of termination would
have totaled approximately $3,062,000.
The following is a summary of data concerning total debt:
<TABLE>
<CAPTION>
Revolving Credit Facility Lines of Credit
------------------------- ---------------
1998 1997 1998 1997
- - -----------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Outstanding borrowings at end of period $90,000 $ 60,000 $24,220 $ 12,540
Outstanding month-end balances:
Maximum 90,000 120,000 45,930 40,225
Average 62,802 85,417 12,310 22,116
Weighted average interest rate (including the
effect of the aforementioned interest rate swap
agreements):
At end of period 6.27% 6.74% 5.92% 6.04%
For the period 6.65% 6.26% 5.73% 5.75%
</TABLE>
Future maturities of long-term debt at November 1, 1998 are as follows:
<TABLE>
<CAPTION>
Year Amount
- - -------------------------------------------------------------
(In thousands)
<S> <C>
Fiscal 2000 $ 2,510
Fiscal 2001 90,000
- - -------------------------------------------------------------
TotaL $92,510
- - -------------------------------------------------------------
</TABLE>
37
<PAGE> 38
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. DEFERRED REVENUE AND GAIN
On December 11, 1995, the Company's headquarters building was sold by
its joint venture owner. The Company had a 50% interest in this joint venture
which was formed in 1986 to construct, finance, own and operate a 300,000
square-foot office building in Atlanta, Georgia. The Company's share of the
pretax gain from the sale was $14,251,000. Concurrent with the sale, the Company
extended its lease for office space in the building for an additional seven
years. The gain has been deferred and is being amortized on a straight-line
basis through July 2005 since the landlord may terminate the lease as of this
date, and is recorded as a reduction in rent expense. At November 1, 1998 and
November 2, 1997, the deferred gain was $9,991,000 and $11,479,000, of which
$8,495,000 and $9,983,000, respectively, was classified as a long-term.
Included in deferred revenue in the accompanying balance sheets was
$353,000 and $2,237,000 at November 1, 1998 and November 2, 1997, respectively,
resulting from redemption of 580,947 shares of the Company's common stock. On
December 1, 1994, the stock was returned by a major customer as partial
consideration for the Company agreeing to renegotiate that customer's contract
for services. The difference between the fair market value of the stock at the
redemption date and the unamortized cost of the prior service contract was
deferred and is being amortized into income through December 1998, the term of
the new service contract.
8. STOCK OPTION AND PURCHASE PLANS
The Company has a stock incentive plan and an employee stock purchase
plan. These plans are described in detail below.
The stock incentive plan provides for the grant of incentive stock
options, nonqualified stock options and other equity-based incentives. At
November 1, 1998, there were 3,817,200 shares of common stock reserved for this
plan, of which 920,014 shares were available for future option grants. Incentive
stock options are granted at not less than fair value and expire five to ten
years after the date of grant. Nonqualified options are granted at prices
determined by the Board of Directors and expire five to ten years after the date
of grant. The exercise period for all options is fixed by the Board.
Nonqualified stock options to purchase common stock have been granted to certain
directors.
On January 1, 1996, the Company instituted an employee stock purchase
plan for all employees. Employees may contribute up to 15% of their compensation
to purchase the Company's common stock at 85% of the lower of the fair market
value on the first or last business day of quarterly purchase periods. Under the
plan, the Company sold 182,357 and 68,448 shares in 1998 and 1997 at average
exercise prices of $15.83 and $23.13, respectively. The Company has reserved
600,000 shares of common stock for the plan. At November 1, 1998, 307,409 shares
were available for future issuance.
No compensation expense related to these plans has been recognized
consistent with the provisions of Accounting Principles Board Opinion No. 24,
"Accounting for Stock Issued to Employees". Had compensation expense for the
plans been recorded based on the fair value of the options at the grant date as
prescribed by Statement of Financial Accounting Standards No. 123 ("SFAS 123")
"Accounting for Stock-Based Compensation" the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Fiscal Years
------------------------------------------------------------------------
1998 1997 1996
-------------------- ---------------------- ----------------------
Reported Pro forma Reported Pro forma Reported Pro forma
- - --------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net Income $36,799 $34,957 $24,458 $23,228 $25,257 $24,960
Basic earnings per common share $ 1.35 $ 1.28 $ 0.99 $ 0.94 $ 1.08 $ 1.07
Diluted earnings per common share $ 1.29 $ 1.23 $ 0.91 $ 0.86 $ 1.00 $ 0.99
</TABLE>
Pro forma amounts were computed using the Black-Scholes option pricing model
with the following assumptions used for grants in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997/1996
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend yield .84% .60%
Expected volatility 35% 32%
Risk free interest rate range 4.68% to 5.86% 4.91% to 6.91%
Expected lives 3 months to 7.7 years 3 months to 7.7 years
</TABLE>
38
<PAGE> 39
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Since the SFAS 123 method of accounting has not been applied to options
granted prior to October 30, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
--------------------------------------------------
<S> <C> <C>
Outstanding, at October 29, 1995 2,997,750 $ 8.28
Granted 469,674 21.13
Exercised (298,733) 5.51
Canceled/Expired (151,331) 11.94
- - -----------------------------------------------------------------------------------------------------------
Outstanding, at October 27, 1996 3,017,360 10.37
Options exercisable, end of year 1,517,514 7.22
Granted 753,393 21.64
Exercised (560,345) 6.16
Canceled/Expired (70,151) 15.18
- - -----------------------------------------------------------------------------------------------------------
Outstanding, at November 2, 1997 3,140,257 13.72
Options exercisable, end of year 1,511,456 9.12
Granted 476,500 19.30
Exercised (429,734) 7.62
Canceled/Expired (289,837) 21.16
- - -----------------------------------------------------------------------------------------------------------
Outstanding, at November 1, 1998 2,897,186 14.80
- - -----------------------------------------------------------------------------------------------------------
Options exercisable, end of year 1,610,619 $10.96
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
A summary of options outstanding at November 1, 1998 follows:
<TABLE>
<CAPTION>
Weighted Averaged
Range Number Remaining Weighted Average Number Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Prices Exercisable Exercise Prices
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.05 - $ 9.25 811,826 3.9 $ 5.32 773,295 $ 5.34
11.38 - 19.88 1,323,271 7.6 14.80 611,133 12.92
20.44 - 29.13 754,785 7.1 24.84 224,039 24.83
31.13 - 32.00 7,304 8.4 31.40 2,152 31.59
- - ---------------------------------------------------------------------------------------------------------------------
$ 3.05 - $32.00 2,897,186 6.4 $14.80 1,610,619 $10.96
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9. BENEFIT PLANS
The Company has a tax qualified 401(k) defined contribution plan which
covers substantially all nonhighly compensated employees, as defined under the
Internal Revenue Code, after one year of service. The plan provides for a
matching company contribution of an amount up to 2% of employee compensation. In
addition, the Company may make discretionary contributions to the plan which are
invested in the Company's common stock. Company contributions are 100% vested
after two years of service.
39
<PAGE> 40
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has an unfunded, nonqualified plan for those highly
compensated employees not covered by the 401(k) plan. Under this plan, after one
year of service, the Company matches participant contributions up to 2% of
participant compensation. In addition, the Company may make discretionary
contributions to the plan. Participants are immediately 100% vested in their
contributions and are 100% vested in the Company's contribution after two years
of service. Participant contributions may be used to purchase rights to buy
company stock or may be invested in funds established by the plan administrator.
All company contributions are used to purchase rights to buy company stock.
Rights are purchased at the fair value of the underlying stock at the time of
grant, less the exercise price of $0.15 per share. Rights may not be exercised
until the date the participant terminates employment. At November 1, 1998,
370,620 rights ranging in price from $3.05 to $34.69 per share were outstanding
and 425,296 were available for grant.
Effective in June 1994, the Company instituted a management equity
program whereby members of senior management who were designated as participants
could purchase, at fair market value, shares of company common stock, and for
those participants who met certain minimum stock ownership thresholds, stock
options were granted as set forth in the plan. This plan was terminated on
December 31, 1996. At November 1, 1998, 106,932 shares had been issued under the
plan. Any stock options granted under this plan were issued under the Company's
stock incentive plan. At November 1, 1998, the balance of notes receivable from
plan participants for stock purchases was $80,000.
Certain highly compensated employees may also qualify for an unfunded,
nonqualified salary continuation plan. The plan provides for a benefit upon
reaching age 62 and ending at age 76 equal to 20% of average annual compensation
as defined in the plan. For participants who become eligible after January 1,
1997, the plan provides for a benefit equal to 1% of average annual
compensation, as defined in the plan, multiplied by the lesser of 20 years or
the years from eligibility until attainment of age 62. Vesting occurs over ten
years (starts in year six at 20% and reaches 100% after year ten).
Total expense related to the above described benefit plans for the
years ended 1998, 1997, and 1996 was $2,737,000, $3,371,000, and $3,164,000,
respectively.
10. INCOME TAXES
The provision (benefit) for federal, foreign and state income taxes
consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
- - --------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $16,884 $10,021 $14,197
State 2,817 2,080 1,576
Foreign 512 427 (83)
- - ----------------------------------------------------------------------------------------------------------------
20,213 12,528 15,690
- - ---------------------------------------------------------------------------------------------------------------
Deferred:
Federal 1,541 3,764 (1,415)
State 324 (1,298) 1,537
- - ---------------------------------------------------------------------------------------------------------------
1,865 2,466 122
- - ---------------------------------------------------------------------------------------------------------------
Total $22,078 $14,994 $15,812
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets are as follows:
40
<PAGE> 41
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
November 1, November 2
1998 1997
- - ----------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
MIS development costs $ (6,599) $ (4,074)
Other (2,835) (3,820)
- - ----------------------------------------------------------------------------------------
(9,434) (7,894)
- - ----------------------------------------------------------------------------------------
Deferred tax assets:
Workers' compensation 11,391 10,527
Profit sharing 6,285 6,017
Bad debts 2,922 2,845
Gain on sale of interest in headquarters building 3,840 4,436
Other 5,503 3,731
- - ----------------------------------------------------------------------------------------
29,941 27,556
- - ----------------------------------------------------------------------------------------
Net deferred tax assets $ 20,507 $ 19,662
- - ----------------------------------------------------------------------------------------
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U.S. statutory tax rate to income tax expense is:
<TABLE>
<CAPTION>
1998 1997 1996
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 2.5 2.9 2.4
Amortization of goodwill 1.5 2.0 0.4
Other, net (1.5) (1.9) 0.7
- - ------------------------------------------------------------------------
Total 37.5% 38.0% 38.5%
- - ------------------------------------------------------------------------
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
At November 1, 1998, the Company was committed under operating leases
for office facilities and certain equipment. Aggregate minimum rental
requirements under these leases are as follows:
<TABLE>
<CAPTION>
Year Amount
- - --------------------------------------------------------------------
(In thousands)
<S> <C>
1999 $12,839
2000 11,570
2001 10,254
2002 8,887
2003 7,266
Thereafter 19,269
- - --------------------------------------------------------------------
Total $70,085
- - --------------------------------------------------------------------
</TABLE>
Rent expense was $13,818,000, $10,241,000 and $8,409,000 for fiscal
years 1998, 1997 and 1996, respectively.
Effective April 1, 1993, the Company entered into a ten year contract
for the purchase of information systems operations services at an annual base
cost ranging from $3,000,000 to $5,000,000.
41
<PAGE> 42
NORRELL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company is, from time to time, a party to ordinary, routine
litigation incidental to the Company's business. In the opinion of management,
the ultimate resolution of all pending legal proceedings will not have an
adverse effect on the Company's business or financial condition.
12. SELECTED QUARTERLY INFORMATION (UNAUDITED)
FISCAL 1998 QUARTER ENDED
<TABLE>
<CAPTION>
February 1 May 3 August 2 November 1
- - -----------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $334,276 $352,295 $351,167 $372,780
Gross profit 74,250 78,585 78,406 87,292
Net income 8,049 9,935 10,464 8,351
- - -----------------------------------------------------------------------------------------------------
Basic earnings per common share (A) $ 0.30 $ 0.36 $ 0.38 $ 0.31
Weighted average shares outstanding (basic) 27,044 27,287 27,400 27,089
- - -----------------------------------------------------------------------------------------------------
Diluted earnings per common share (A) $ 0.28 $ 0.35 $ 0.37 $ 0.30
Weighted average shares outstanding (diluted) 28,553 28,674 28,628 27,815
- - -----------------------------------------------------------------------------------------------------
</TABLE>
FISCAL 1997 QUARTER ENDED
<TABLE>
<CAPTION>
January 26 April 27 July 27 November 2 (B)
- - ----------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $281,234 $317,943 $332,691 $368,171
Gross profit 60,889 69,911 74,317 80,874
Net income 7,201 8,479 9,175 (397)
- - ----------------------------------------------------------------------------------------------------------
Basic earnings per common share (A) $ 0.30 $ 0.35 $ 0.38 (0.01)
Weighted average shares outstanding (basic) 23,720 23,959 24,079 26,723
- - ----------------------------------------------------------------------------------------------------------
Diluted earnings per common share (A) $ 0.28 $ 0.33 $ 0.35 $ (0.01)
Weighted average shares outstanding (diluted) 25,732 25,944 26,308 28,828
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
(A) Due to changes in the weighted average number of shares outstanding each
quarter, the sum of earnings per share per quarter does not equal the earnings
per share for the applicable year.
(B) Refer to Note 5, where non-recurring charges are discussed
42
<PAGE> 43
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Norrell Corporation:
We have audited the accompanying consolidated balance sheets of Norrell
Corporation (a Georgia corporation) and subsidiaries as of November 1, 1998 and
November 2, 1997 and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended November 1, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Norrell Corporation
and subsidiaries as of November 1, 1998 and November 2, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended November 1, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 15,1998
43
<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Shareholders of Norrell Corporation:
We have audited in accordance with generally accepted auditing
standards, the financial statements of Norrell Corporation included in this Form
10-K and have issued our report thereon dated December 15, 1998. Our audit was
made for the purpose of forming an opinion on the financial statements taken as
a whole. The schedule listed in the preceding index is presented for the purpose
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 15, 1998
44
<PAGE> 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information regarding Executive Officers of the Company is contained in
Item 4A of Part I. Information as to Directors required by this item is
incorporated by reference from the Company's definitive Proxy Statement, under
the caption "Proposal 1. Election of Directors", which Proxy Statement will be
mailed to stockholders in connection with the Company's annual meeting of
stockholders, which is scheduled to be held March 2, 1999 and will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Information as to Executive Compensation required by this item is
incorporated by reference from the Company's definitive Proxy Statement, under
the caption "Executive Compensation" which Proxy Statement will be mailed to
stockholders in connection with the Company's annual meeting of stockholders,
which is scheduled to be held March 2, 1999 and will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as to Security Ownership of Certain Beneficial Owners and
Management required by this item is incorporated by reference from the Company's
definitive Proxy Statement, under the caption "Voting Rights and Principal
Shareholders", which Proxy Statement will be mailed to stockholders in
connection with the Company's annual meeting of stockholders, which is scheduled
to be held March 2, 1999 and will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as to Certain Relationships and Related Transactions
required by this item is incorporated by reference from the Company's definitive
Proxy Statement, under the caption "Certain Transactions and Relationships",
which Proxy Statement will be mailed to stockholders in connection with the
Company's annual meeting of stockholders, which is scheduled to be held March 2,
1999 and will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
45
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS.
1. FINANCIAL STATEMENTS.
The following consolidated financial statements of the Company
and it subsidiaries are included in Item 8 of this report:
Consolidated Balance Sheets as of November 1, 1998 and
November 2, 1997.
Consolidated Statements of Income for fiscal years 1998, 1997,
and 1996.
Consolidated Statements of Shareholders' Equity for fiscal
years 1998, 1997, and 1996.
Consolidated Statements of Cash Flows for fiscal years 1998,
1997, and 1996.
Notes to Consolidated Financial Statements.
Reports of Independent Public Accountants.
Selected quarterly financial data for the fiscal years ended
November 1, 1998 and November 2, 1997 is set forth in Note 12
Selected Quarterly Information (Unaudited) included in Item 8
of this report.
2. FINANCIAL STATEMENT SCHEDULES.
The following financial statement schedule of the Company is
included herein:
II. Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are
not applicable, or the required information is included in the
financial statements or notes thereto.
3. EXHIBITS.
The Exhibits filed as a part of this Form 10-K are listed in
Item 14(c) of this report, which listing is incorporated
herein by reference.
(B) REPORTS ON FORM 8-K.
(a) No Reports on Form 8-K were filed during the last quarter of
the period covered by this report on Form 10-K.
3. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company,
incorporated by reference to Exhibit 3.1 of the Company's
Amendment No. 1 to Registration Statement on Form S-1, as
filed with the Securities and Exchange Commission on June 22,
1994.
3.2 Amended and Restated Bylaws of the Company, incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.
</TABLE>
46
<PAGE> 47
<TABLE>
<S> <C>
10.1 Stock Purchase Agreement executed in 1981 by and among Guy W.
Millner, Robert J. Gibson, Norrell Corporation and the several
purchasers named therein and related stock purchase option
agreement, incorporated by reference to Exhibit 10.1 of the
Company's Registration Statement on Form S-1, as filed with
the Securities and Exchange Commission on June 10, 1994.
10.2.1 Norrell Corporation Employee Stock Purchase Plan, incorporated
by reference to Exhibit 10.2 to the Company Form 10-K for the
year ended October 29, 1995.*
10.2.2 Second Amendment to the Norrell Corporation Employee Stock
Purchase Plan, dated August 28, 1997 by Norrell Corporation,
to be effective September 30, 1997, incorporated by reference
to Exhibit 10.2.2 to the Company's Form 10-K for the fiscal
year ended November 2, 1997.*
10.3 Agreement and Plan of Reorganization among American Technical
Resources, Inc., Charles F. Phillips, Ralph L. Lary, III, Gary
L. Kilgore, William C. Holman, George G. Lytle, Norrell
Corporation and N. Acquisition Corp., dated August 5, 1996,
incorporated by reference to Exhibit 1 of the Company's
Current Report on Form 8-K filed on August 20, 1996.
10.4 Asset Purchase Agreement among Analytical Technologies, Inc.,
Anatec Canada, Inc., Albert G. Schornberg, James A. Barbour,
Timothy E. Tindle, David H. Cleland and Norrell Corporation,
Norrell Technical Services, Inc., and Norrell Services, Ltd.,
dated July 22, 1996, incorporated by reference to Exhibit 1 of
the Company's Current Report on Form 8-K filed on August 6,
1996.
10.5 Omitted.
10.6 Omitted.
10.7 Omitted.
10.8 Form of Franchise Agreement used by Dynamic Temporary
Services, Inc., incorporated by reference to Exhibit 10.8 to
the Company Form 10-K for the year ended October 27, 1996.
10.9 Form of Franchise Agreement used by Norrell Services, Inc.,
incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-1, as filed with the
Securities and Exchange Commission on June 10, 1994.
10.10 Form of Master Vendor Agreement used by Norrell Services, Inc.
10.11 Form of Agreement between Norrell Corporation and franchisees
of Norrell Services, Inc.
10.12 Form of Management Services Agreement used by Norrell
Services, Inc.
10.13 Joint Venture Agreement dated as of October 15, 1986 between
Habersham Venture, Ltd. and Norrell Corporation, incorporated
by reference to Exhibit 10.13 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.
10.14 Lease dated October 15, 1986 between Norhab Associates and
Norrell Corporation, as amended by that certain amendment
dated May 3, 1988, that certain amendment No. 2 dated
September 13, 1988, and that certain amendment No. 3 dated May
1, 1989, incorporated by reference to Exhibit 10.14 of the
Company's Registration Statement on Form S-1, as filed with
the Securities and Exchange Commission on June 10, 1994.
10.15 Amendment to Lease, dated December 11, 1995, amending Lease
Agreement dated October 15, 1986 between Norhab Associates and
Norrell Corporation, incorporated by reference to Exhibit
10.15 to the Company Form 10-K for the year ended October 29,
1995* .
</TABLE>
- - -------------------------
* / A management contract or compensatory plan, contract or arrangement.
47
<PAGE> 48
<TABLE>
<S> <C>
10.16 First Amendment to Lease, (two), dated December 11, 1995
between Norhab Associates and Norrell Corporation, amending
Lease Agreement dated May 3, 1988, incorporated by reference
to Exhibit 10.16 to the Company Form 10-K for the year ended
October 29, 1995.
10.17 Form of Indemnification Agreement, incorporated by reference
to Exhibit 10.17 of the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange Commission
on June 10, 1994.
10.18 Employment Agreement dated May 24, 1993 between Norrell
Corporation and Larry J. Bryan, incorporated by reference to
Exhibit 10.18 of the Company's Registration Statement on Form
S-1, as filed with the Securities and Exchange Commission on
June 10, 1994.*
10.19 Employment Agreement dated October 15, 1993 between Norrell
Corporation and C. Douglas Miller, incorporated by reference
to Exhibit 10.19 of the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange Commission
on June 10, 1994.*
10.20 Form of agreement for executive officers relating to
confidentiality and non-competition.*
10.21 Amended and Restated Employment Agreement dated December 15,
1997 by and between Norrell Corporation and C. Douglas Miller,
incorporated by reference to Exhibit 10.21 to the Company's
Form 10-K for the fiscal year ended November 2, 1997.*
10.22 Employment Agreement by and between Norrell Corporation and
James Ernest Riddle effective March 3, 1997, incorporated by
reference to Exhibit 10.22 to the Company's Form 10-K for the
fiscal year ended November 2, 1997.*
10.23 Agreement and Plan of Merger among Comtex Information Systems,
Inc., Comtex Systems, Inc., Norrell Corporation and N.
Acquisition Corp. dated December 8, 1996, incorporated by
reference to the Company's Report on Form 8-K dated December
8, 1996 and filed on December 20, 1996.
10.24 Omitted.
10.25 Norrell Corporation Horizon - Vision Supplemental Plan, as
amended and restated on June 8, 1994, incorporated by
reference to Exhibit 10.25 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.
10.26 Form of Norrell Corporation Non-Management Director Restricted
Stock Grant Agreement, incorporated by reference to Exhibit
10.26 of the Company's Registration Statement on Form S-1, as
filed with the Securities and Exchange Commission on June 10,
1994.*
10.27 Norrell Corporation 1994 Stock Incentive Plan, incorporated by
reference to Exhibit 10.27 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.*
10.28 Omitted.
</TABLE>
- - ------------------------------------
* / A management contract or compensatory plan, contract or arrangement.
48
<PAGE> 49
<TABLE>
<S> <C>
10.29 The Norrell Corporation 1991 Stock Option Plan, incorporated
by reference to Exhibit 10.29 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.*
10.30 Preferred Vendor Agreement, executed May 14, 1993 between
Norrell Services, Inc. and United Parcel Service General
Services Company, incorporated by reference to Exhibit 10.30
to the Company's Form 10-K for the year ended October 27,
1996. The Exhibit A of the Agreement has been omitted. The
Company agrees to furnish supplementally to the Commission
upon its request a copy of such Exhibit.
10.31 Management Services Agreement between International Business
Machines and Tascor Incorporated, executed on December 1, 1994
("MSA"), incorporated by reference to Exhibit 10.31 to the
Company Form 10-K for the year ended October 30, 1994. The
attachments to the MSA listed on page 11 of the Agreement have
been omitted. The Company agrees to furnish supplementally to
the Commission upon its request a copy of any such attachment.
10.32 Amended and Restated Credit Agreement, dated October 21, 1996,
by and among Norrell Corporation as the Company, certain
Commercial Lending Institutions as the Lenders, Bank of
America National Trust and Savings Association, as the Agent
for the Lenders, and SunTrust Bank, Atlanta, as the co-Agent
for the Lenders, incorporated by reference to Exhibit 10.32 to
the Company Form 10-K for the year ended October 27, 1996. The
Credit Agreement contains a list of schedules and exhibits on
page (v) of the table of contents. These schedules and
exhibits have been omitted. The Company agrees to furnish
supplementally to the Commission upon its request a copy of
any such schedules and exhibits.
10.33 First Amendment to Credit Agreement, dated December 26, 1996,
amending the Amended and Restated Credit Agreement dated
October 21, 1996 among Norrell Corporation as the Company,
certain Commercial Lending Institutions as the Lenders, Bank
of America National Trust and Savings Association, as the
Agent for the Lenders and SunTrust Bank, Atlanta, as co-agent
for the Lenders, incorporated by reference to Exhibit 10.33 to
the Company Form 10-K for the year ended October 27, 1996.
Schedules and exhibits referenced in the Agreement have been
omitted. The Company agrees to furnish supplementally to the
Commission upon its request a copy of any such schedules and
exhibits.
10.34 Agreement of Limited Partnership executed October 6, 1994 by
and between HealthTask Corporation, Tascor Incorporated and
Ernst & Young U.S. LLP, incorporated by reference to Exhibit
10.34 to the Company Form 10-K for the year ended October 30,
1994.
10.35 Omitted.
10.36 Non-Technical Services Agreement between International
Business Machines Corporation and Tascor Incorporated, entered
into between the parties on April 4, 1995 and April 11, 1995,
incorporated by reference to Exhibit 10.36 to the Company Form
10-K for the year ended October 29, 1995. The attachments and
appendices listed on page iii of the Agreement have been
omitted. The Company agrees to furnish supplementally to the
Commission upon its request a copy of any such attachment or
appendix.
10.37 Purchase and Sale Agreement between Norhab Associates, a joint
venture comprised of Norrell Corporation and Habersham
Venture, Ltd. as Seller and Oregon Public Employees'
Retirement Fund, or its nominee, as Buyer, dated October 25,
1995, incorporated by reference to Exhibit 10.37 to the
Company Form 10-K for the year ended October 29, 1995. The
exhibits listed on page iii of the Agreement have been
omitted. The Company agrees to furnish supplementally to the
Commission upon its request a copy of any such exhibit.
</TABLE>
- - -------------------------------------
* / A management contract or compensatory plan, contract or arrangement.
49
<PAGE> 50
<TABLE>
<S> <C>
10.38 First Amendment to Purchase and Sale Agreement between Norhab
Associates, a joint venture comprised of Norrell Corporation
and Habersham Venture, Ltd. as Seller and Oregon Public
Employees' Retirement Fund, or its nominee, Property Georgia
OBJLW One Corporation, an Oregon Corporation, as Buyers, dated
December 4, 1995, incorporated by reference to Exhibit 10.38
to the Company Form 10-K for the year ended October 29, 1995.
10.39 Closing Document # 3 Assignment and Assumption of Leases dated
October 25, 1995 between Norhab Associates, a joint venture,
comprised of Norrell Corporation and Habersham Venture, Ltd.
("Assignor") and Property Georgia OBJLW One Corporation, an
Oregon Corporation ("Assignee"), incorporated by reference to
Exhibit 10.39 to the Company Form 10-K for the year ended
October 29, 1995.
10.40 Form of Norrell Corporation Restricted Stock Agreement.*
10.41.1 Norrell Corporation 401(k) Retirement Savings Plan,
incorporated by reference to Exhibit 10.41.1 to the Company
Form 10-K for the year ended October 27, 1996.
10.41.2 Second Amendment to the Norrell Corporation 401(k) Retirement
Savings Plan dated December 30, 1996 by Norrell Corporation to
be effective January 1, 1997, incorporated by reference to
Exhibit 10.41.2 to the Company's Form 10-K for the fiscal year
ended November 2, 1997.
10.42.1 Norrell Corporation Non-Qualified Deferred Compensation Plan,
effective January 1, 1995, incorporated by reference to
Exhibit 10.42 to the Company Form 10-K for the year ended
October 29, 1995.*
10.42.2 Amendment to Norrell Corporation Non-Qualified Deferred
Compensation Plan, incorporated by reference to Exhibit
10.42.2 to the Company's Form 10-K for the fiscal year ended
November 2, 1997.*
21 Subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (for SEC use only).
</TABLE>
- - -------------------------------------
* / A management contract or compensatory plan, contract or arrangement.
50
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORRELL CORPORATION
The Company
By: /s/ C. DOUGLAS MILLER
------------------------------------------------
C. Douglas Miller
Chairman, Chief Executive Officer and President
Date: 1/7/99
------------------------
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 Company
and in the capacities and on the dates indicated.
/s/ C. DOUGLAS MILLER
- - ------------------------------------------------
C. Douglas Miller
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
Date: 1/7/99
------------------------
/s/ J. ERNEST RIDDLE
- - ------------------------------------------------
J. Ernest Riddle
Director and Chief Operating Officer
Date: 1/7/99
------------------------
/s/ SCOTT L. COLABUONO
- - ------------------------------------------------
Scott L. Colabuono
Sr. Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: 1/7/99
------------------------
/s/ GUY W. MILLNER
- - ------------------------------------------------
Guy W. Millner
Director
Date: 1/8/99
------------------------
/s/ THOMAS A. VADNAIS
- - ------------------------------------------------
Thomas A. Vadnais
Director, President and Chief
Operating Officer, Tascor
Date: 1/7/99
------------------------
51
<PAGE> 52
/s/ LARRY J. BRYAN
- - ------------------------------------------------
Larry J. Bryan
Director and Executive Vice President
Date: 1/7/99
------------------------
/s/ CARL E. SANDERS
- - ------------------------------------------------
Carl E. Sanders
Director
Date: 1/8/99
------------------------
- - ------------------------------------------------
Lucius E. Burch, III
Director
Date:
------------------------
/s/ DONALD A. MCMAHON
- - ------------------------------------------------
Donald A. McMahon
Director
Date: 1/8/99
------------------------
- - ------------------------------------------------
Nancy Clark Reynolds
Director
Date:
------------------------
- - ------------------------------------------------
Frank A. Metz, Jr.
Director
Date:
------------------------
- - ------------------------------------------------
Kaaren Johnson-Street
Director
Date:
------------------------
- - ------------------------------------------------
Parker H. Petit
Director
Date:
------------------------
52
<PAGE> 53
SCHEDULE II
NORRELL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED NOVEMBER 1, 1998, NOVEMBER 2, 1997 AND OCTOBER 27, 1996
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Allowance for doubtful accounts,
balance at beginning of year $ 6,497 $ 7,411 $ 4,869
Addition charged to cost and expense 2,436 1,095 2,315
Charged to other accounts - -- 227
Deductions (1,582) (2,009) --
------- ------- ----------
Allowance for doubtful accounts,
balance at end of year $ 7,351 $ 6,497 $ 7,411
======= ======= ==========
</TABLE>
53
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - --------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the
Company, incorporated by reference to Exhibit 3.1 of the
Company's Amendment No. 1 to Registration Statement on Form
S-1, as filed with the Securities and Exchange Commission on
June 22, 1994.
3.2 Amended and Restated Bylaws of the Company, incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.
10.1 Stock Purchase Agreement executed in 1981 by and among Guy W.
Millner, Robert J. Gibson, Norrell Corporation and the
several purchasers named therein and related stock purchase
option agreement, incorporated by reference to Exhibit 10.1
of the Company's Registration Statement on Form S-1, as filed
with the Securities and Exchange Commission on June 10, 1994.
10.2.1 Norrell Corporation Employee Stock Purchase Plan,
incorporated by reference to Exhibit 10.2 to the Company Form
10-K for the year ended October 29, 1995.*
10.2.2 Second Amendment to the Norrell Corporation Employee Stock
Purchase Plan, dated August 28, 1997 by Norrell Corporation,
to be effective September 30, 1997, incorporated by reference
to Exhibit 10.2.2 to the Company's Form 10-K for the fiscal
year ended November 2, 1997.*
10.3 Agreement and Plan of Reorganization among American Technical
Resources, Inc., Charles F. Phillips, Ralph L. Lary, III,
Gary L. Kilgore, William C. Holman, George G. Lytle, Norrell
Corporation and N. Acquisition Corp., dated August 5, 1996,
incorporated by reference to Exhibit 1 of the Company's
Current Report on Form 8-K filed on August 20, 1996.
10.4 Asset Purchase Agreement among Analytical Technologies, Inc.,
Anatec Canada, Inc., Albert G. Schornberg, James A. Barbour,
Timothy E. Tindle, David H. Cleland and Norrell Corporation,
Norrell Technical Services, Inc., and Norrell Services, Ltd.,
dated July 22, 1996, incorporated by reference to Exhibit 1
of the Company's Current Report on Form 8-K filed on August
6, 1996.
10.5 Omitted.
10.6 Omitted.
10.7 Omitted.
10.8 Form of Franchise Agreement used by Dynamic Temporary
Services, Inc., incorporated by reference to Exhibit 10.8 to
the Company Form 10-K for the year ended October 27, 1996.
10.9 Form of Franchise Agreement used by Norrell Services, Inc.,
incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-1, as filed with the
Securities and Exchange Commission on June 10, 1994.
10.10 Form of Master Vendor Agreement used by Norrell Services,
Inc.
10.11 Form of Agreement between Norrell Corporation and franchisees
of Norrell Services, Inc.
10.12 Form of Management Services Agreement used by Norrell
Services, Inc.
10.13 Joint Venture Agreement dated as of October 15, 1986 between
Habersham Venture, Ltd. and Norrell Corporation, incorporated
by reference to Exhibit 10.13 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.
10.14 Lease dated October 15, 1986 between Norhab Associates and
Norrell Corporation, as amended by that certain amendment
dated May 3, 1988, that certain amendment No. 2 dated
September 13, 1988, and that certain amendment No. 3 dated
May 1, 1989, incorporated by reference to Exhibit 10.14 of
the Company's Registration Statement on Form S-1, as filed
with the Securities and Exchange Commission on June 10, 1994.
10.15 Amendment to Lease, dated December 11, 1995, amending Lease
Agreement dated October 15, 1986 between Norhab Associates
and Norrell Corporation, incorporated by reference to Exhibit
10.15 to the Company Form 10-K for the year ended October 29,
1995.*
</TABLE>
- - ---------------
* / A management contract or compensatory plan, contract or arrangement.
46
<PAGE> 55
<TABLE>
<S> <C>
10.16 First Amendment to Lease, (two), dated December 11, 1995
between Norhab Associates and Norrell Corporation, amending
Lease Agreement dated May 3, 1988, incorporated by reference
to Exhibit 10.16 to the Company Form 10-K for the year ended
October 29, 1995.
10.17 Form of Indemnification Agreement, incorporated by reference
to Exhibit 10.17 of the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange
Commission on June 10, 1994.
10.18 Employment Agreement dated May 24, 1993 between Norrell
Corporation and Larry J. Bryan, incorporated by reference to
Exhibit 10.18 of the Company's Registration Statement on Form
S-1, as filed with the Securities and Exchange Commission on
June 10, 1994.*
10.19 Employment Agreement dated October 15, 1993 between Norrell
Corporation and C. Douglas Miller, incorporated by reference
to Exhibit 10.19 of the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange
Commission on June 10, 1994.*
10.20 Form of agreement for executive officers relating to
confidentiality and non-competition.*
10.21 Amended and Restated Employment Agreement dated December 15,
1997 by and between Norrell Corporation and C. Douglas
Miller, incorporated by reference to Exhibit 10.21 to the
Company's Form 10-K for the fiscal year ended November 2,
1997.*
10.22 Employment Agreement by and between Norrell Corporation and
James Ernest Riddle effective March 3, 1997, incorporated by
reference to Exhibit 10.22 to the Company's Form 10-K for the
fiscal year ended November 2, 1997.*
10.23 Agreement and Plan of Merger among Comtex Information
Systems, Inc., Comtex Systems, Inc., Norrell Corporation and
N. Acquisition Corp. dated December 8, 1996, incorporated by
reference to the Company's Report on Form 8-K dated December
8, 1996 and filed on December 20, 1996.
10.24 Omitted.
10.25 Norrell Corporation Horizon - Vision Supplemental Plan, as
amended and restated on June 8, 1994, incorporated by
reference to Exhibit 10.25 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.
10.26 Form of Norrell Corporation Non-Management Director
Restricted Stock Grant Agreement, incorporated by reference
to Exhibit 10.26 of the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange
Commission on June 10, 1994.*
10.27 Norrell Corporation 1994 Stock Incentive Plan, incorporated
by reference to Exhibit 10.27 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.*
10.28 Omitted.
</TABLE>
- - ---------------
* / A management contract or compensatory plan, contract or arrangement.
47
<PAGE> 56
<TABLE>
<S> <C>
10.29 The Norrell Corporation 1991 Stock Option Plan, incorporated
by reference to Exhibit 10.29 of the Company's Registration
Statement on Form S-1, as filed with the Securities and
Exchange Commission on June 10, 1994.*
10.30 Preferred Vendor Agreement, executed May 14, 1993 between
Norrell Services, Inc. and United Parcel Service General
Services Company, incorporated by reference to Exhibit 10.30
to the Company's Form 10-K for the year ended October 27,
1996. The Exhibit A of the Agreement has been omitted. The
Company agrees to furnish supplementally to the Commission
upon its request a copy of such Exhibit.
10.31 Management Services Agreement between International Business
Machines and Tascor Incorporated, executed on December 1,
1994 ("MSA"), incorporated by reference to Exhibit 10.31 to
the Company Form 10-K for the year ended October 30, 1994.
The attachments to the MSA listed on page 11 of the Agreement
have been omitted. The Company agrees to furnish
supplementally to the Commission upon its request a copy of
any such attachment.
10.32 Amended and Restated Credit Agreement, dated October 21,
1996, by and among Norrell Corporation as the Company,
certain Commercial Lending Institutions as the Lenders, Bank
of America National Trust and Savings Association, as the
Agent for the Lenders, and SunTrust Bank, Atlanta, as the
co-Agent for the Lenders, incorporated by reference to
Exhibit 10.32 to the Company Form 10-K for the year ended
October 27, 1996. The Credit Agreement contains a list of
schedules and exhibits on page (v) of the table of contents.
These schedules and exhibits have been omitted. The Company
agrees to furnish supplementally to the Commission upon its
request a copy of any such schedules and exhibits.
10.33 First Amendment to Credit Agreement, dated December 26, 1996,
amending the Amended and Restated Credit Agreement dated
October 21, 1996 among Norrell Corporation as the Company,
certain Commercial Lending Institutions as the Lenders, Bank
of America National Trust and Savings Association, as the
Agent for the Lenders and SunTrust Bank, Atlanta, as co-agent
for the Lenders, incorporated by reference to Exhibit 10.33
to the Company Form 10-K for the year ended October 27, 1996.
Schedules and exhibits referenced in the Agreement have been
omitted. The Company agrees to furnish supplementally to the
Commission upon its request a copy of any such schedules and
exhibits.
10.34 Agreement of Limited Partnership executed October 6, 1994 by
and between HealthTask Corporation, Tascor Incorporated and
Ernst & Young U.S. LLP, incorporated by reference to Exhibit
10.34 to the Company Form 10-K for the year ended October 30,
1994.
10.35 Omitted.
10.36 Non-Technical Services Agreement between International
Business Machines Corporation and Tascor Incorporated,
entered into between the parties on April 4, 1995 and April
11, 1995, incorporated by reference to Exhibit 10.36 to the
Company Form 10-K for the year ended October 29, 1995. The
attachments and appendices listed on page iii of the
Agreement have been omitted. The Company agrees to furnish
supplementally to the Commission upon its request a copy of
any such attachment or appendix.
10.37 Purchase and Sale Agreement between Norhab Associates, a
joint venture comprised of Norrell Corporation and Habersham
Venture, Ltd. as Seller and Oregon Public Employees'
Retirement Fund, or its nominee, as Buyer, dated October 25,
1995, incorporated by reference to Exhibit 10.37 to the
Company Form 10-K for the year ended October 29, 1995. The
exhibits listed on page iii of the Agreement have been
omitted. The Company agrees to furnish supplementally to the
Commission upon its request a copy of any such exhibit.
</TABLE>
- - ---------------
* / A management contract or compensatory plan, contract or arrangement.
48
<PAGE> 57
<TABLE>
<S> <C>
10.38 First Amendment to Purchase and Sale Agreement between Norhab
Associates, a joint venture comprised of Norrell Corporation
and Habersham Venture, Ltd. as Seller and Oregon Public
Employees' Retirement Fund, or its nominee, Property Georgia
OBJLW One Corporation, an Oregon Corporation, as Buyers,
dated December 4, 1995, incorporated by reference to Exhibit
10.38 to the Company Form 10-K for the year ended October 29,
1995.
10.39 Closing Document # 3 Assignment and Assumption of Leases
dated October 25, 1995 between Norhab Associates, a joint
venture, comprised of Norrell Corporation and Habersham
Venture, Ltd. ("Assignor") and Property Georgia OBJLW One
Corporation, an Oregon Corporation ("Assignee"), incorporated
by reference to Exhibit 10.39 to the Company Form 10-K for
the year ended October 29, 1995.
10.40 Form of Norrell Corporation Restricted Stock Agreement.*
10.41.1 Norrell Corporation 401(k) Retirement Savings Plan,
incorporated by reference to Exhibit 10.41.1 to the Company
Form 10-K for the year ended October 27, 1996.
10.41.2 Second Amendment to the Norrell Corporation 401(k) Retirement
Savings Plan dated December 30, 1996 by Norrell Corporation
to be effective January 1, 1997, incorporated by reference to
Exhibit 10.41.2 to the Company's Form 10-K for the fiscal
year ended November 2, 1997.
10.42.1 Norrell Corporation Non-Qualified Deferred Compensation Plan,
effective January 1, 1995, incorporated by reference to
Exhibit 10.42 to the Company Form 10-K for the year ended
October 29, 1995.*
10.42.2 Amendment to Norrell Corporation Non-Qualified Deferred
Compensation Plan, incorporated by reference to Exhibit
10.42.2 to the Company's Form 10-K for the fiscal year ended
November 2, 1997.*
21 Subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (for SEC use only).
</TABLE>
- - ---------------
* / A management contract or compensatory plan, contract or arrangement.
49
<PAGE> 1
EXHIBIT 10.10
MASTER VENDOR AGREEMENT
THIS MASTER VENDOR AGREEMENT made as of this day of , 199 , by
and between Norrell Services, Inc., a Georgia corporation ("Norrell"),
and , a corporation ("Client").
W I T N E S S E T H:
WHEREAS, Client has a continuing need for supplemental personnel; and
WHEREAS, Norrell is a leading provider of such personnel to businesses
in the United States and Canada;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Services Provided. Norrell will provide to Client the services
described in Exhibit A attached hereto and made a part hereof (the "Services")
as Client shall require, pursuant to the terms and conditions of this Agreement.
Unless specifically authorized in Exhibit A, Client agrees that Norrell
employees will not be placed in any jobs involving driving Client vehicles;
handling cash, credit card information or other valuables; lifting over forty
(40) pounds; cleaning bathrooms, first responder tasks or any work in any area
with possible exposure to bloodborne pathogens; handling of or exposure to
hazardous substances; work requiring exposure to lead or asbestos; the operation
of any production machinery that is not guarded in accordance with relevant OSHA
requirements; use of any power tools; maintenance or repair of any machinery;
operation of forklifts by employees who have not been trained and certified in
accordance with current OSHA standards; welding; work requiring the use of
respirators (including dust masks); work on or around navigable bodies of water;
and any work above floor level, including elevated platforms, scaffolding,
manlifts, ladders, etc. The parties may, from time to time, amend Exhibit A in a
writing signed by a duly authorized representative of each party.
2. Master Vendor Program. During the term of this Agreement, Client
agrees to use Norrell exclusively for the Services. In the event Norrell is
unable to fill any Client order with a Norrell employee, Client agrees that
Norrell, as Master Vendor, may subcontract for such services with another
vendor.
3. Term. This Agreement shall continue for a term of two (2) years
after the date first entered above, unless sooner terminated as set forth
herein, and will be automatically renewed for like terms unless either party
serves written notice of its intent to terminate the Agreement not less than
thirty (30) days prior to the expiration of any such term. Either party hereto
may terminate this Agreement with or without cause by giving not less than sixty
(60) days written notice to the other party hereto. If Client delivers notice to
Norrell of its intent to terminate, Client shall include therein
<PAGE> 2
the reasons for such termination and Norrell shall have thirty (30) days to
rectify or modify its performance, after which 30-day period Client shall revoke
or affirm its termination.
4. Rates for Services. For the term of this Agreement, the rates for
the performance of the Services pursuant to this Agreement shall be as set forth
in Exhibit A attached hereto and made a part hereof.
5. Invoices. Norrell shall submit to Client a weekly invoice for the
Services performed during the previous Monday through Sunday billing period.
Invoices submitted hereunder shall be due and payable by Client net ten (10)
days. Client agrees to pay reasonable costs, expenses and fees of collection, if
Client's account is in default and placed with a collection agency or attorney
for collection. In the event of termination of this Agreement, Client shall pay
Norrell for all Services performed prior to the date of termination.
6. Buyer Satisfaction. Norrell agrees that the Services will be
performed to the satisfaction of Client and agrees to allow Client a reasonable
period of time to determine if the Services provided by Norrell were performed
in a satisfactory manner. If Client determines within a reasonable period of
time that the Services provided by a Norrell employee are not satisfactory, and
Norrell is so notified, Client will not be charged for such Services performed
and Norrell will provide corrective Services and, if necessary or requested,
replacement personnel upon notification from Client or within a mutually agreed
upon period of time.
7. Hiring of Norrell Employees by Client. Client agrees that
utilization of any Norrell employee by Client within six months of the last use
of such Norrell employee through Norrell shall only be through Norrell. If
Client desires to hire any Norrell employee on a permanent basis, Client will
notify Norrell, in writing. Client may directly hire any Norrell employee at any
time after the employee has been assigned to Client by Norrell for thirteen (13)
full time weeks (or 520 hours), without further obligation to Norrell.
8. Independent Contractor. Norrell shall act at all times as an
independent contractor, and nothing contained herein shall be construed to
create the relationship of principal and agent, or employer and employee,
between Norrell and Client. The Norrell employees assigned to perform the
Services for Client are the employees of Norrell, and any subcontractor's
employees assigned to perform the Services for Client are the employees of that
subcontractor.
9. Norrell Employees. Norrell shall recruit, interview, test, select,
hire, and train the persons who shall provide the Services hereunder. Client
agrees that the costs of any pre-assignment screening required by Client which
is not routinely performed by Norrell as a part of its regular hiring procedures
(drug testing, credit checks, and criminal background checks are examples of
non-routine screening) shall
2
<PAGE> 3
be paid or reimbursed by Client. Norrell shall have sole responsibility to
counsel, discipline, review, evaluate, set the pay rates of, and terminate its
employees assigned to Client. Norrell assumes full responsibility for all
contributions, taxes and assessments with respect to its employees under all
applicable federal, state and local laws (including withholding from wages of
employees where required). Norrell further agrees that it will comply with all
other applicable federal, state or local laws or regulations applicable to
Norrell as an employer regarding compensation, hours of work or other conditions
of employment.
10. Client Contractors. If Client desires Services not described in
Exhibit A to this Agreement which are outside the normal scope of Services
provided by Norrell, Norrell agrees that Client may hire contractors (the
"Client Contractors") to provide such Services, and that Client may request that
such Client Contractors forward invoices directly to Norrell. Norrell agrees to
dispatch job orders to the Client Contractors and submit to Client a weekly
invoice, as more fully described in Section 5 of this Agreement, which is an
aggregate bill for Services rendered by Norrell, by Norrell's subcontractors and
by the Client Contractors, if any. In no event shall Norrell be responsible for
supervising or controlling the Client Contractors nor shall Norrell be liable
for any acts or omissions of Client Contractors, their agents or employees.
11. Indemnification.
(a) Norrell shall indemnify and hold harmless Client, its agents
and employees from and against any and all claims, losses, actions, damages,
expenses, and all other liabilities, including but not limited to attorneys'
fees (the "Liabilities"), arising out of or resulting from Norrell's negligent
performance of or failure to perform the work hereunder to the extent any such
Liabilities are attributable to bodily injury to or death of any person or to
damage to or destruction of any property, whether belonging to Client or to
another, provided, however, that Norrell shall not indemnify or hold harmless
Client to the extent any such Liabilities are caused by the negligent or
unlawful acts or omissions of Client, its employees or third parties. Work
product produced by Norrell employees shall be reviewed and approved by a Client
representative prior to its incorporation into Client's work product, processes
or plans, and Norrell shall have no liability for such end product or process.
In the event that the Liabilities are the result of the joint or concurrent
negligence of Norrell and Client, Norrell's duty of indemnification shall be in
the same proportion that the negligence of Norrell contributed thereto. Client
acknowledges and agrees that in no event shall Norrell or any of its officers,
directors, employees, or representatives be liable to Client for any special,
indirect, incidental or consequential damages in connection with this Agreement.
(b) Norrell agrees to require each of its subcontractors to
execute an indemnification agreement which directly indemnifies Client and holds
it harmless under the same terms and conditions as outlined in this Section 11.
3
<PAGE> 4
12. Insurance. Norrell shall maintain at its expense: (a) Workers'
Compensation and Employer's Liability Insurance, (b) Commercial General
Liability Insurance, and (c) a Fidelity Bond. Norrell shall require each of its
subcontractors to list Norrell and Client as additional insureds on each such
subcontractor's Commercial General Liability Insurance. If Norrell's insurance
policy is to be canceled or changed by insured or insurer so as to affect the
coverage required by this Agreement, at least ten (10) days prior written notice
of such cancellation or change shall be sent to Client at the address to which
invoices are to be sent by Norrell.
13. Notices. All notices which it may be necessary or proper for
either Client or Norrell to give or deliver to the other shall be sent, and
shall be deemed given when received by registered or certified mail, postage
prepaid and return receipt requested, and if given by Client to Norrell shall be
addressed to:
Norrell Services, Inc.
---------------------------------
---------------------------------
Attn:
----------------------------
With a copy to: Norrell Corporation
3535 Piedmont Road, NE
Atlanta, GA 30305
Attn: General Counsel
and if given by Norrell to Client, shall be addressed to:
---------------------------------
---------------------------------
---------------------------------
Attn:
----------------------------
14. Assignment. The rights and obligations of the parties hereunder
shall not be assigned without the prior written consent of the other party,
except that Norrell may assign its rights and obligations hereunder to any
affiliate of Norrell without the prior written consent of the Client. Otherwise,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, and their respective successors and assigns.
15. Amendments. This Agreement, and the provisions hereof, may be
altered, amended, modified or superseded only in a writing executed by both of
the parties hereto.
4
<PAGE> 5
16. Force Majeure. The obligations of Norrell hereunder shall be
excused during any period of delay caused by matters such as strikes, acts of
God, shortages of raw material or power, governmental actions or compliance with
governmental requirements, whether voluntary or pursuant to order, or any other
matter which is beyond the reasonable efforts of Norrell to control.
17. Enforcement, Waiver. No waiver of or failure to exercise any
option, right or privilege under the terms of this Agreement by either of the
parties hereto on any occasion or occasions shall be construed to be a waiver of
the same or of any other option, right or privilege on any other occasion.
18. Entire Agreement. This Agreement, together with the Exhibits
referenced herein, shall constitute the entire Agreement between the parties
with respect to the subject matter and supersedes all previous Agreements
between Client and Norrell relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
NORRELL SERVICES, INC.
-----------------------------------
By: By:
----------------------------------- -----------------------------
Title: Title:
-------------------------------- --------------------------
5
<PAGE> 6
EXHIBIT A
SERVICES AND RATES
I. Positions to be Filled; Rates.
[IF PAYROLLING SERVICES ARE BEING CONSIDERED, YOU MUST CONTACT THE
LEGAL DEPARTMENT TO DISCUSS]
II. Cost of Living Adjustments
The fees for the Services shall be increased effective on each
anniversary date of this Agreement over the fees shown in Part I above by the
percentage increase equal to the percentage increase in the applicable regional
Consumer Price Index for the month which is two months immediately preceding
such anniversary date over the applicable regional Consumer Price Index for the
same month one year prior.
III. Governmentally Mandated Cost Increases
If Norrell's compliance with any law or the requirements of any
governmental agency after the date of execution of this Agreement shall result
in an increase in the labor cost to Norrell of providing the Services (an "Event
of Change"), then Norrell shall have the right to immediately increase its fees
to compensate for such increased costs and to place Norrell in the same position
after any Event of Change as Norrell was in prior to such Event of Change (e.g.
a change to minimum wage rates, state unemployment insurance, workers'
compensation, mandatory benefits requirements).
<PAGE> 1
EXHIBIT 10.11
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this _____ day of
_______________, 19___, by and between Norrell Corporation, including its
wholly-owned subsidiaries ("Norrell"), and __________________________________,
[a corporation] [a resident] of the State of _______________ ("Service
Provider"). Norrell and Service Provider are herein sometimes collectively
referred to as "Parties" and individually as a "Party."
W I T N E S S E T H:
WHEREAS, Norrell is a provider of Management Services; and
WHEREAS, the Service Provider is in the Temporary Help Services
Business as a licensee or franchisee of Norrell Services, Inc. ("Franchisor");
and
WHEREAS, Norrell desires the assistance of Service Provider in
identifying sales opportunities and in closing and implementing contracts in its
Management Services Business; and
WHEREAS, the Service Provider desires to provide such assistance to
Norrell.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Parties agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the meanings ascribed to them in this Section 1:
1.01 AREA means the geographic territory described in an
attachment to the most recent franchise or license agreement (or agreements, if
Service Provider has more than one franchise) or license between the
Service Provider and Franchisor.
1.02 CONFIDENTIAL INFORMATION means all information related to
the Management Services Business of Norrell or the Temporary Help Services
Business of the Service Provider which (1) derives economic value, actual or
potential, from not being generally known to other persons who can obtain
economic value from its disclosure or use, and (2) is the subject of efforts by
Norrell or the Service Provider that are reasonable under the circumstances to
maintain its secrecy. Assuming the criteria in clauses (1) and (2) above are
met, Confidential Information shall include, without limitation, actual and
potential customer lists, sales and marketing information, customer account
records, training and operations material and memoranda, computer software and
systems, personnel records, code books, pricing information and financial
information concerning or relating to the business, accounts, customers,
associates and affairs of Norrell or the Service Provider and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to
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Norrell or the Service Provider (subject to the franchise or license agreement
with Franchisor), respectively. Confidential Information shall not include (i)
information released to the public at large without restriction, (ii)
information generally known to be obtainable from public sources in usable form
without significant effort or expense, (iii) information lawfully and
independently developed or acquired without reliance in any way on the
information received as a result of this Agreement, and (iv) general skills and
learning lawfully and independently acquired.
1.03 CONTRACTED SERVICES means the initiation of, and
participation jointly with Norrell in, sales of Management Services by Service
Provider where the Management Services include services in the categories
included in Service Provider's franchise or license agreement; and, if requested
by Norrell and no incremental overhead cost to Service Provider would be
involved, (a) the provision of recruiting, interviewing, basic testing, and
training services for individuals seeking to be employed by Norrell, and (b) the
provision of office or training space to Norrell during contract start-up and
implementation; provided, however, Contracted Services shall not include the
provision of Temporary Employees to Norrell by the Service Provider.
1.04 CONTRACTED SERVICES FEE means, as to any client contract
initiated and sold by Service Provider, two percent (2%) of the Management
Services Revenue paid to Norrell with respect to Management Services provided to
the client in the Area; or, with respect to Management Services provided to the
client outside the Area, one and one-half percent (1 1/2%) of the Management
Services Revenue paid to Norrell during the first year of the client contract
and one percent (1%) of the Management Services Revenue paid to Norrell
thereafter. For a client contract initiated and sold by someone other than
Service Provider but performed within the Area, one-half percent (1/2%) of
the Management Services Revenue paid to Norrell with respect to Management
Services provided to the client in the Area will be paid to Service Provider.
The Contracted Services Fee will be paid until the earlier of termination of the
client contract or termination of Service Provider's franchise or license
agreement with Franchisor.
1.05 LIQUIDATION FEE means an amount payable by Norrell to
Franchisor with respect to a Temporary Employee placed on assignment with
Norrell by Service Provider and whom Norrell hires directly prior to such
Temporary Employee completing eight (8) weeks (320 hours) on assignment with
Norrell after the date Norrell notifies Service Provider of its intent to hire
such employee. The dollar amount of such Liquidation Fee shall be equal to the
pro rata amount of Gross Margin or Gross Profit (as defined in the franchise or
license agreement, respectively, between the Services Provider and Franchisor)
Norrell would have paid had the Temporary Employee remained on the assignment
with Norrell for the full eight (8) week period. For example, if Gross Margin
was $100 a week and the Temporary Employee was hired three (3) weeks after
notification, Norrell would pay a Liquidation Fee of $500 (8-3 x $100) to
Franchisor to be applied in accordance with the applicable franchise or license
agreement. The Gross Margin or Gross Profit shall be calculated in accordance
with the Pricing Rules established between Service Provider and Norrell on
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an annual basis. A copy of the Pricing Rules for the first twelve months of this
Agreement is attached as Exhibit A hereto for convenience of reference; a copy
of the Pricing Rules for subsequent years may be obtained from Franchisor or
Norrell not more than 30 days prior to the beginning of such Agreement year.
1.06 MANAGEMENT SERVICES means managing and performing all or
part of a client's business activity or functions for which Norrell has
responsibility for the function or activity and for the results of such function
or activity.
1.07 MANAGEMENT SERVICES BUSINESS means the business of
performing Management Services.
1.08 MANAGEMENT SERVICES REVENUE means the dollar amount charged
to and collected from the client by Norrell for direct Management Services
performed in the Area less (i) the amount paid by Norrell to the Service
Provider for any Temporary Employees the Service Provider provides to Norrell or
Liquidation Fees or Placement Fees charged to Norrell in the conduct of Service
Provider's Temporary Help Services Business, and (ii) any amounts that represent
pass-through costs to the client, such as expenses, sub-contracted services, or
the direct costs of equipment and facilities necessary to provide the Management
Services.
1.09 PLACEMENT FEES means the fees payable by Norrell to
Franchisor with respect to individuals hired directly by Norrell who are
recruited and screened by Service Provider. The amount of such fees are
calculated in accordance with the Pricing Rules established annually by
agreement of Franchisor and Norrell.
1.10 TEMPORARY EMPLOYEE(s) means any person(s) furnished to
Norrell by the Service Provider and who perform(s), on a temporary or part-time
basis, jobs or services for Norrell.
1.11 TEMPORARY HELP SERVICES BUSINESS means the business of
marketing and providing, on a temporary or part-time basis, personnel to perform
services for business and industry customers.
2. SERVICES TO BE PROVIDED. The Service Provider agrees to provide
the Contracted Services to Norrell to assist Norrell in its Management Services
Business to be performed in the Area. No Contract Services Fee will be paid with
respect to a client contract if Service Provider declines to perform the
Contracted Services requested by Norrell in connection with that client
contract.
3. PAYMENT FOR CONTRACTED SERVICES. Norrell agrees to pay to the
Services Provider the Contracted Services Fee within thirty (30) days of the end
of any Norrell fiscal quarter in which Norrell receives Management Services
Revenue. Additional incremental overhead costs incurred by Service Provider
during start-up in connection with the Contracted Services which are
specifically approved in advance by Norrell on a case by case basis will be
billed to client as pass-through costs.
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<PAGE> 4
4. TEMPORARY HELP SERVICES. In the event Norrell needs Temporary
Employees in the performance of Management Services for a client, Service
Provider may provide Temporary Employees to Norrell, subject to the franchise or
license agreement between Service Provider and Franchisor. In the event that
Norrell hires for positions of full-time employment with Norrell, any of the
Temporary Employees placed on assignment with Norrell by the Service Provider in
the conduct of such Temporary Help Service Business, Norrell will pay a
Liquidation Fee for each such Temporary Employee hired by Norrell before the
expiration of eight (8) weeks from the date of notification to Service Provider
of Norrell`s intent to hire the Temporary Employee. Norrell shall strive to have
approximately ten percent (10%) of all the Full Time Equivalent positions under
a Norrell Management Services contract being performed in the Area staffed by
Temporary Employees through the Service Provider or to provide Service Provider
the opportunity to obtain an equivalent gross margin dollar amount through
Liquidated Damages or Placement Fees. If Service Provider has Temporary
Employees assigned to the Management Services client at the outset with a
Management Services Contact who are hired as FTE's by Norrell, that hire will be
subject to the Liquidation Fee provisions of this agreement, except that the
Gross Margin or Gross Profit percentage used for the Liquidation Fee calculation
shall be the Gross Margin or Gross Profit percentage billed to the client by
Franchisor for the week prior to the beginning of the Management Services
Contract.
5. SATISFACTORY SERVICES. All services provided by Service Provider
hereunder shall meet commercially reasonable quality standards set by Norrell.
6. TERM. This Agreement shall remain in effect until the earlier to
occur of (i) the date the Service Provider ceases to be a franchisee or licensee
of Franchisor, (ii) the date the Parties mutually agree to terminate this
Agreement, (iii) five (5) years from the date this Agreement was entered into,
unless extended by agreement of the Parties, or (iv) a breach of this Agreement
which is not cured within ten (10) days from the receipt of written notice of
such breach given to the breaching party.
7. AGREEMENT NOT TO SOLICIT EMPLOYEES. The Service Provider and
Norrell mutually agree that during the term of this Agreement and for a period
of one (1) year following the termination, for whatever reason, of this
Agreement, the Parties will not, either directly or indirectly, on the Parties
own behalf or in the service or on behalf of others, solicit or attempt to
solicit, divert or hire away to another business or enterprise any person
employed by the other Party within the Area, whether or not such employment is
pursuant to a written agreement and whether or not such employment is for a
determined period or is at will; nor will the Parties at any time during such
period, either directly or indirectly, induce or attempt to induce any such
employee to terminate, breach or otherwise fail fully to perform any employment
agreement with the other.
8. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL
INFORMATION.
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<PAGE> 5
8.01 OWNERSHIP OF CONFIDENTIAL INFORMATION. The Parties
acknowledge and agree that all Confidential Information of the other party, and
all physical embodiments thereof, is confidential to and shall be and remain the
sole and exclusive property of the respective party. Upon request by the other
party, and in any event upon termination of the Agreement for any reason, the
Parties shall promptly deliver to the other all property belonging to the other
including, without limitation, all Confidential Information (and all embodiments
thereof) then in the Parties' custody, control or possession.
8.02 NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION. The
Parties agree that they will not, either during the term of this Agreement or
for five (5) years thereafter, without the prior written consent of the other,
disclose or make available any of the other Party's Confidential Information to
any person or entity or make or cause to be made or permit or allow, either on
their own behalf or on behalf of others, any use of Confidential Information
other than in the proper performance of the respective duties hereunder. The
Parties agree that neither party is prohibited hereby from disclosing or using
the Confidential Information owned by the other party which is required to be
disclosed pursuant to a requirement of a governmental agency or of law without
similar restrictions or other protections against public disclosure, provided,
however, that the such disclosing party shall first have (i) given written
notice of such required disclosure to the other, (ii) made a reasonable effort
to obtain a protective order requiring that the Confidential Information so
disclosed be used only for the purposes for which disclosure is required, and
(iii) taken reasonable steps to allow the other to seek to protect the
confidentiality of the information required to be disclosed.
9. MISCELLANEOUS.
9.01 PREVIOUS AGREEMENT. Contracts to provide Management
Services which already exist between Norrell and its client as of the date of
this Agreement (the "Existing Client Contracts") shall not be subject to this
Agreement but instead are subject to an Agreement regarding Management Services
previously executed between Service Provider and Tascor Incorporated (the
"Earlier Agreement"). Except with respect to the Existing Client Contracts, the
Earlier Agreement, if any, between Service Provider and Tascor Incorporated is
hereby terminated and of no further force and effect.
9.02 EXCLUDED CONTRACTS. Contracts to provide Management
Services which are by and between any customer and an entity in which Norrell
has an ownership interest but is not the sole owner or shareholder (a "Joint
Venture") shall not be subject to the terms of this Agreement unless the Joint
Venture and any non-Norrell shareholder or partner of the Joint Venture
expressly agree in writing.
9.03 EXPENSES. Each party hereto will pay its own expenses in
connection with the performance of its obligations required by this Agreement.
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9.04 NOTICES. Every notice or other communication required or
contemplated by this Agreement by any party shall be delivered either by (i)
personal delivery, or (ii) postage prepaid return receipt requested certified
mail, addressed to the party for whom intended at the address stated on the
signature page of this Agreement or at such other address as the intended
recipient previously shall have designated by written notice to the other party.
Notice by certified mail shall be effective on the date it is officially
recorded as delivered to the intended recipient by return receipt or equivalent.
All notices and other communications required or contemplated by this Agreement
delivered in person shall be deemed to have been delivered to and received by
the addressee and shall be effective on the date of personal delivery or on the
date postmarked, respectively. Notice not given in writing shall be effective
only if acknowledged in writing by a duly authorized representative of the party
to whom it was given.
9.05 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
9.06 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire agreement of the Parties. No representation or statements of any kind
made by any representative of either party which are not stated herein shall be
binding. No course of dealing or usage of trade or course of performance shall
be relevant to explain or supplement any term expressed in this Agreement.
9.07 ASSIGNMENT. This Agreement may not be assigned by the
Service Provider, without the written consent of Norrell, to any person or
entity other than a person or entity which properly acquires all of Service
Provider's rights and obligations under its franchise or license agreement with
Franchisor.
9.08 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.09 AMENDMENT AND WAIVERS. This Agreement and any provision
hereof, may be changed, waived, discharged, or terminated only by a statement in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought.
9.10 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, to
the extent possible, it shall be construed in such manner as to be valid, legal,
and enforceable so as to most nearly retain the intent of the Parties and, if
such construction is not possible, such provision shall be severed from this
Agreement, and in either case, the validity and enforceability of any other
provision and of the entire Agreement shall not be affected thereby.
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9.11 TITLES AND SUBTITLES. The title and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
9.12 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the Parties and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any person, other
than the Parties and such assigns, any legal or equitable rights hereunder.
9.13 RESOLUTION OF DISPUTES. If a dispute arises out of or
relates to this contract, or the breach thereof, and if such dispute cannot be
settled through direct discussions within thirty (30) days of written notice of
such dispute from one party to the other, the Parties agree to first endeavor to
settle the dispute in an amicable manner by mediation under the Commercial
Mediation Rules of the American Arbitration Association. Thereafter, any
unresolved controversy or claim arising out of or relating to this contract, or
breach thereof, shall be settled by arbitration in Atlanta, Georgia, in
accordance with the Commercial Arbitration 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. Reasonable attorney's fees,
costs, and travel costs (up to $2,500), if any, shall be awarded to the
prevailing party in any such arbitration.
SERVICE PROVIDER: NORRELL CORPORATION
By:
- - ----------------------------- -----------------------
Title:
------------------
Address: Address:
- - ----------------------------- 3535 Piedmont Road, N.E.
- - ----------------------------- Atlanta, Georgia 30305
- - ----------------------------- Attn.: President
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CONSENT
Norrell Services, Inc. ("Franchisor") hereby consents to the execution by the
Franchisee or Licensee of the Services Agreement between Franchisee or Licensee
and Norrell Corporation (the "Services Agreement" and "Norrell", respectively);
and Franchisor waives the obligation of the Franchisee or Licensee contained in
Section 7(e) or comparable section of the Franchise or License Agreement
between the Franchisee or Licensee and Franchisor to devote their full time to
the development and operation of their franchised or licensed business but only
for the sole purpose of providing Contracted Services as defined in and
pursuant to the Services Agreement. All Temporary Employees provided to Norrell
by the Franchisee or Licensee, and any Liquidated Damages relating to the
Temporary Employees, are subject to the Franchise or License Agreement between
Franchisor and the Franchisee or Licensee. Ownership of all Confidential
Information referenced in the Services Agreement between Franchisee or Licensee
and Norrell is subject to the rights of Franchisor contained in the Franchise
or License Agreement.
Date: NORRELL SERVICES, INC.
-----------------------------
By:
--------------------------
Title:
-----------------------
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EXHIBIT A
PRICING RULES
- - -Temporary Help Mark-Up % over Burden & Pay
Tier I - when the number of Norrell staffers is below 10% of FTE's at
contract site in franchisee's market in a monthly accounting period 25.5%
(Typically Equates to a 20.0% GM at a 15% Burden Rate)
Tier II - when the number of Norrell staffers is at or above 10% of
FTE's at contract site in franchisee's market in a monthly accounting period
21.5%
(Typically Equates to a 17.7% GM at a 15% Burden Rate)
Whether pricing is at Tier I or Tier II will be locally administered
and pricing adjusted at beginning of monthly accounting period based on
headcount on the first day of the monthly accounting period.
- - -Temp to Hire Liquidation Fee Period
(includes, in addition to normal from date temp to hire, people already
of notification in place at client)
- - -Placement Fee for Startup Hiring (Positions on Schedule B to Franchise
Agreement)
(Volume dependent -- See Attachment 1)
<PAGE> 10
Attachment 1 to Exhibit A
Placement Fee
Annual Number Placements
Per Year for the Contract Placement Fee Per Person
0 - 100 $500.00
101 - 200 $450.00
201 - 300 $400.00
301 - 600 $350.00
>600 $300.00
<PAGE> 1
EXHIBIT 10.12
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made as of this ____ day of , 199__, by and
between Norrell Services, Inc., a Georgia corporation ("Norrell"), and ,
a corporation ("Client").
W I T N E S S E T H:
WHEREAS, Client has a need for management services; and
WHEREAS, Norrell is a leading provider of such management services to
businesses in the United States and Canada;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Services Provided. Norrell will provide to Client the management
services described in the Scope of Work attached hereto as Exhibit A and made a
part hereof (the "Services") as Client shall require, pursuant to the terms and
conditions of this Agreement. Unless specifically authorized in Exhibit A,
Client agrees that Norrell employees will not be placed in any jobs involving
driving Client vehicles; handling cash, credit card information or other
valuables; lifting over forty (40) pounds; cleaning bathrooms, first responder
tasks or any work in any area with possible exposure to bloodborne pathogens;
handling of or exposure to hazardous substances; work requiring exposure to lead
or asbestos; the operation of any production machinery that is not guarded in
accordance with relevant OSHA requirements; use of any power tools; maintenance
or repair of any machinery; operation of forklifts by employees who have not
been trained and certified in accordance with current OSHA standards; welding;
work requiring the use of respirators (including dust masks); work on or around
navigable bodies of water; and any work above floor level, including elevated
platforms, scaffolding, manlifts, ladders, etc.
2. Term. This Agreement shall continue for a term (the "Term") of
three (3) years after the date first entered above and will be automatically
renewed for two additional one-year terms.
3. Rates for Services; Direct Expenses.
(a) For the initial term of this Agreement, the rates and
payment terms for the performance of the Services pursuant to this Agreement
shall be as set forth in Exhibit B attached hereto and made a part hereof.
Thereafter the rates and payment terms shall be as mutually agreed upon by
Client and Norrell and shall be set forth in a written amendment to Exhibit B
signed by each of the parties hereto.
<PAGE> 2
(b) Client shall provide all supplies, materials, office space,
utilities, and other operating expense items necessary for the performance of
the Services. Client shall provide, and maintain in good working order, all
equipment deemed necessary by Client and Norrell to the provision of the
Services by Norrell.
4. Invoices.
(a) Norrell shall, on the fifteenth day of each month, submit
to Client a monthly invoice in advance equal to 1/12th of the annual fee for the
Services to be provided, as described in Exhibit B. Invoices submitted hereunder
shall be due and payable by Client thirty (30) days from invoice date.
Adjustments to the monthly invoice for rate or transaction variances (if any)
will be included in the next month's billing.
(b) Client agrees to pay reasonable costs, expenses and fees of
collection, if Client's account is in default and/or placed with a collection
agency or attorney for collection. In the event of termination of this
Agreement, Client agrees to pay Norrell for all Services performed prior to the
date of termination.
5. Reports. Norrell shall provide to Client such written reports as
Norrell and Client shall agree upon from time to time.
6. Termination. This Agreement may not be terminated prior to the end
of the Term except as follows:
(a) Client may terminate this Agreement for Cause (as herein
defined) upon delivery to Norrell of written notice of its intent to terminate
for Cause. Client shall include in such notice the basis for such termination
and Norrell shall have ninety (90) days to rectify or modify its performance,
after which 90 - day period Client shall revoke or affirm its termination. As
used herein, "Cause" shall mean a material breach of the terms of this Agreement
by Norrell.
(b) Client may terminate this Agreement for Client's
convenience upon payment of liquidated damages in an amount equal to twenty-five
percent (25%) of the remaining fees owed by Client to Norrell for the remaining
Term of this Agreement. In the event that Client's termination of this Agreement
(either in full or in part) would impose notice requirements on Norrell pursuant
to the federal Worker Adjustment and Retraining Notification Act and/or state or
local laws or regulations pertaining to business or plant closings, or partial
or complete business cessations or business relocations, Client will provide
Norrell with at least ninety (90) days prior written notice of such termination.
7. Performance Requirements. Norrell shall meet or exceed written
performance standards to which Client and Norrell mutually agree after the
Services have been provided by Norrell for ninety (90) days ("Performance
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Standards"). The Performance Standards shall be attached to this Agreement as
Exhibit C. In the event no written standards are attached as Exhibit C to this
Agreement, Norrell shall provide the Services in a commercially reasonable
manner.
8. Laws and Regulations. Norrell agrees that it will comply with all
laws and regulations applicable to Norrell's employees, including the Fair Labor
Standards Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act of 1967, the Rehabilitation Act of 1973, the Immigration
Reform and Control Act of 1986, and the Americans with Disabilities Act of 1990.
9. Independent Contractor. Norrell shall act at all times as an
independent contractor, and nothing contained herein shall be construed to
create the relationship of principal and agent, or employer and employee,
between Norrell and Client.
10. Norrell Employees.
(a) The Norrell employees assigned to perform the Services for
Client are solely the employees of Norrell. Norrell shall have sole
responsibility to counsel, discipline, review, evaluate, set the pay rates of,
and terminate its employees who perform the Services. Norrell will maintain all
necessary payroll and personnel records, and compute wages and withhold
applicable federal, state and local taxes and social security payments for the
Norrell personnel performing the Services.
(b) During the term of this Agreement and for six (6) months
thereafter, Client agrees not to hire, nor to solicit for the purpose of hiring,
any Norrell employee who has provided Services to Client pursuant to this
Agreement without the prior written approval of Norrell and payment to Norrell
of liquidated damages in the amount of $3,000.00 for each Norrell employee
hired.
11. Indemnification.
(a) Norrell and Client, as Indemnitors, shall each indemnify
and hold harmless the other party to this Agreement and such party's agents and
employees, as Indemnitees, from and against any and all claims, losses, actions,
damages, expenses, and all other liabilities, including but not limited to
attorneys' fees (the "Liabilities"), to the extent arising out of or resulting
from the Indemnitor's negligent performance of or failure to perform its
obligations hereunder to the extent any such Liabilities are attributable to
bodily injury to or death of any person or to damage to or destruction of any
property, provided, however, that the Indemnitor shall not indemnify or hold
harmless the Indemnitee to the extent any such Liabilities are caused by the
negligent or unlawful acts or omissions of the Indemnitee, its agents, employees
or third parties. In the event
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<PAGE> 4
that the Liabilities are the result of the joint or concurrent negligence of
Norrell and Client, the Indemnitor's duty of indemnification shall be in the
same proportion that the negligence of the Indemnitor contributed thereto.
Client acknowledges and agrees that in no event shall Norrell, any affiliate, or
any of its officers, directors, employees, or representatives be liable to
Client for any special, indirect, incidental or consequential damages in
connection with this Agreement.
(b) Norrell agrees to require each of its subcontractors to
execute an indemnification agreement which directly indemnifies Client and holds
it harmless under the same terms and conditions as outlined in this Section 11.
12. Confidentiality.
(a) Norrell and Client each agree that they will not, either
during the term of Norrell's provision of the Services to Client or for three
(3) years thereafter, without the prior written consent of the other party
hereto, disclose or make available any Confidential Information (as herein
defined) to any person or entity, nor shall either party make or cause to be
made, or permit or allow, either on its own behalf or on behalf of others, any
use of the other party's Confidential Information. Norrell and Client agree not
to use, transcribe, copy, duplicate or otherwise reproduce or retain all or any
portion of the Confidential Information in any manner whatsoever and shall cause
all Confidential Information or copies thereof to be returned to the other party
promptly upon termination of the Services. "Confidential Information" shall mean
all personnel records, fees and charges, and all documents evidencing business
plans, proposals, strategies, sales and marketing information, training and
operations material and memoranda, and pricing and financial information, and
all computer software and computer programs identified to the recipient of such
information by the giving party as proprietary, and which are obtained by or
furnished, disclosed or disseminated to the recipient during the course of
Norrell's engagement by Client, as well as all other information provided to one
party to this Agreement by the other party orally or in writing which is
identified as confidential prior to disclosure or delivery to the recipient, and
all information and matters which constitute trade secrets of the disclosing
party, all of which are hereby agreed to be the property of and confidential to
the owner and discloser of such Confidential Information. Notwithstanding the
terms of this Agreement, the obligations of each party as set forth in this
Agreement with respect to the Confidential Information of the other party shall
not apply to any Confidential Information which: (i) is at the time of
disclosure, or thereafter becomes, a part of the public domain through no act or
error by either party; (ii) was otherwise in the lawful possession of the other
party prior to disclosure, as shown by competent evidence; or (iii) is hereafter
received by the other party from a third party lawfully in possession thereof
and who has the lawful power to disclose such to the other party.
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(b) In the event of a breach or threatened breach of the
provisions of this paragraph, Norrell or Client shall be entitled to an
injunction restraining such breach or threatened breach without having to prove
actual damages. Such injunctive relief as Norrell or Client may obtain shall be
in addition to other rights and remedies available at law and in equity to the
parties. The rights and obligations of this paragraph shall survive the
termination or expiration of this Agreement for such time as the rights and
obligations created by subparagraph 12(a) above shall continue.
(c) At the request of Client, Norrell shall have each of its
employees assigned to perform the Services execute a non-disclosure agreement in
a form mutually acceptable to Client and Norrell.
13. Insurance. Norrell shall maintain at its expense: (a) Workers'
Compensation and Employer's Liability Insurance, (b) Commercial General
Liability Insurance, and (c) a Fidelity Bond. Norrell shall require each of its
subcontractors to list Client and Norrell as additional insureds on each such
subcontractor's Commercial General Liability Insurance. If Norrell's insurance
policy is to be canceled or changed by insured or insurer so as to affect the
coverage required by this Agreement, at least ten (10) days prior written notice
of such cancellation or change shall be sent to Client at the address to which
invoices are to be sent by Norrell.
14. Notices. All notices which it may be necessary or proper for
either Client or Norrell to give or deliver to the other shall be sent, and
shall be deemed given when received by registered or certified mail, postage
prepaid and return receipt requested, and if given by Client to Norrell shall be
addressed to:
Norrell Services, Inc.
3535 Piedmont Road, N.E.
Atlanta, Georgia 30305
Attn:
-------------------
with a copy to: Norrell Corporation
3535 Piedmont Road, N.E.
Atlanta, Georgia 30305
Attn: Mark H. Hain, General Counsel
and if given by Norrell to Client, shall be addressed to:
---------------------------------------
---------------------------------------
---------------------------------------
Attn:
----------------------------------
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15. Assignment. The rights and obligations of the parties hereunder
shall not be assigned without the prior written consent of the other party,
except that Norrell may assign its rights and obligations hereunder to any
affiliate of Norrell without the prior written consent of Client, provided that
any such assignment shall in no way affect the rights and obligations of Client
hereunder. Otherwise, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and their respective successors and assigns.
16. Amendments. This Agreement, and the provisions hereof, may be
altered, amended, modified or superseded only in a writing executed by both of
the parties hereto.
17. Force Majeure. Neither party shall be liable to the other nor be
deemed to be in breach of this Agreement for failure or delay in rendering
performance arising out of causes factually beyond its control and without its
fault or negligence. Such causes may include, but are not limited to: Acts of
God or the public enemy, wars, fires, floods, epidemics, quarantine
restrictions, strikes, unforeseen freight embargoes or unusually severe weather.
Dates or times of performance shall be extended to the extent of delays excused
by this section, provided that the party whose performance is affected notifies
the other party promptly of the existence and nature of such delay.
18. No Waiver. No waiver of or failure to exercise any option, right
or privilege under the terms of this Agreement by either of the parties hereto
on any occasion or occasions shall be construed to be a waiver of the same or of
any other option, right or privilege on any other occasion.
19. Entire Agreement. This Agreement, together with the Exhibits
referenced herein, shall constitute the entire Agreement between the parties
with respect to the subject matter and supersedes all previous agreements
between Client and Norrell relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
NORRELL SERVICES, INC.
-----------------------------------
By: By:
---------------------------------- -----------------------------------
Title: Title:
------------------------------- ---------------------------------
6
<PAGE> 7
EXHIBIT A
Scope of Work
<PAGE> 8
EXHIBIT B
Fees for Services
I. Fees for Services.
II. Cost of Living Adjustments
The fees for the Services shall be increased effective on each
anniversary date of this Agreement over the fees shown in Part I above by the
percentage increase equal to the percentage increase in the applicable regional
Consumer Price Index for the month which is two months immediately preceding
such anniversary date over the applicable regional Consumer Price Index for the
same month one year prior.
III. Governmentally Mandated Cost Increases
If Norrell's compliance with any law or the requirements of any
governmental agency after the date of execution of this Agreement shall result
in an increase in the labor cost to Norrell of providing the Services (an "Event
of Change"), then Norrell shall have the right to immediately increase its fees
to compensate for such increased costs and to place Norrell in the same position
after any Event of Change as Norrell was in prior to such Event of Change (e.g.
a change to minimum wage rates, state unemployment insurance, workers'
compensation, mandatory benefits requirements).
<PAGE> 1
EXHIBIT 10.20
INSTRUCTIONS TO COMPLETING EMPLOYMENT AGREEMENTS
(BSC - Corporate)
- - - PLEASE PREPARE AND EXECUTE TWO DUPLICATE ORIGINALS OF EACH EMPLOYMENT
AGREEMENT. PROVIDE THE EMPLOYEE WITH A FULLY SIGNED ORIGINAL AND SEND
THE OTHER SIGNED ORIGINAL TO THE HUMAN RESOURCES DEPARTMENT, PROPERLY
IDENTIFIED AS AN ORIGINAL.
- - - CORPORATE SIGNATURES
Employment Agreements should be signed by a Vice President responsible
for the department or division in which the employee works, or by the
Vice President of Human Resources.
- - - EXHIBIT A
The definition of the territory should be limited to the geographic
area in which the employee performs his or her duties on behalf of
Norrell; it cannot be defined with respect to the geographic area in
which Norrell does business. DO NOT DEFINE THE TERRITORY AS "THE UNITED
STATES" OR "THE UNITED STATES AND CANADA!"
The employee must perform his duties in all or substantially all of the
defined territory; for example, the definitions should not specify the
state of Georgia when the employee's duties are limited to the Atlanta
metropolitan area.
The territory must be clearly defined and definite as of the date the
agreement is signed; it cannot expand or contract automatically during
the term of the Agreement to reflect an expansion or contraction of the
area in which the employee performs his or her duties on behalf of
Norrell. If the employee's territory changes, the parties should
execute a new Exhibit A and attach it to the original.
- - - EXHIBIT B
Because each Norrell employee will have different duties, this
definition should be completed on a case-by-case basis. In completing
the definition, it will be important to be as accurate as possible. The
listing of a duty which the employee does not perform on behalf of
Norrell (but under the terms of the Agreement he or she would be
prohibited from performing for a Competing Business), could render the
entire covenant unenforceable. Conversely, however, the definition
should be as broad as possible, so that Norrell can reap the full
protection available to it. If the employee's job changes, the parties
should execute a new Exhibit B and attach it to the original.
- - - EXHIBIT C
Exhibit C should contain a list of all Inventions, patents, and Works
to which the Associate claims ownership as described in Sections 9, 10,
and 11 herein and of all agreements referred to in Section 12 herein.
If the Associate claims no such ownership or has no applicable
agreements, state "None."
[DO NOT INCLUDE THIS PAGE IN FINAL AGREEMENT.]
<PAGE> 2
EMPLOYMENT AND NONCOMPETITION AGREEMENT
(BSC Corporate)
THIS AGREEMENT is effective this____ day of_________________,
199___, between Norrell Corporation and/or any of its Subsidiaries (the
"Company"), and ___________________________________whose address is_____________
________________________________________________________________________________
________________________(the "Associate").
W I T N E S S E T H:
WHEREAS, the Company desires to employ or to continue the
employment of the Associate to perform, throughout the Area (as defined in
Section 1(a)), the services described in Section 2(b), and the Associate desires
to accept or to continue such employment on the terms and conditions hereinafter
set forth; and
WHEREAS, in the course of the Associate's employment, the
Company will provide Associate and the Associate will gain knowledge of the
business, affairs, finances, management, marketing programs and philosophy,
customers and methods of operation of the Company, the Company will train the
Associate at the expense of the Company in the operation and management of the
Business of the Company and the marketing and sale of the Company's services
through the use of techniques, systems, forms and methods used and devised by
the Company; and the Associate will be furnished by Company with access to lists
of the Company's Customers and their needs, and will or has become personally
known to and acquainted with the Company's Customers in the Area thereby
establishing a personal relationship with such Customers for the benefit of the
Company; and
WHEREAS, the Company would suffer irreparable harm if the
Associate were to use such knowledge, information, business acumen and personal
relationships in competition with the Company; and
NOW, THEREFORE, in consideration of the employment or
continued employment of the Associate by the Company, the above premises and
the other agreements hereinafter set forth, the Company and the Associate
(collectively, the "Parties" and individually, a "Party"), intending to be
legally bound, hereby agree as follows:
1. Definitions.
(a) "Area" shall mean the area set forth in Exhibit "A"
which the Parties acknowledge is no broader than the geographical areas in which
or for which Associate will perform the Duties. As and when the territory in
which the Associate performs the Duties materially changes, the Parties agree to
amend Exhibit "A".
(b) "Business of the Company" shall mean and include the
business of marketing and providing personnel, including personnel to provide
accounting, financial, bookkeeping, clerical, health care, technical and light
industrial services, on a temporary basis to customers located in the Area and
marketing and providing to customers located in the Area technical staffing,
technical consulting and information services, facilities staffing, contract
services, teleservices, communication skills training, human resource services,
staffing services, Management Services and outsourcing, permanent placement, and
data entry services, or the licensing or franchising of others to engage in any
such business. It shall also mean the business of conducting the affairs and
activities of the Corporate Office functions in conjunction with all such
business described in this section.
(c) "Competing Business" shall mean a person or entity
engaged in any business which is the same or essentially the same as the
Business of the Company.
(d) "Confidential Information" of the Company shall mean
all non-public, competitively sensitive information or data of or about Company
other than "Trade Secrets" (as defined below). Confidential Information shall
not include (1) information released to the public at large without restriction,
(2) information generally known to be obtainable from public sources in usable
form without significant effort or expense, (3) information lawfully and
independently developed or acquired without reliance in any way on the
information received pursuant to the Associate's employment hereunder, and (4)
general skills and learning lawfully and independently acquired.
(e) "Corporate Office" shall mean the office of the
Company at 3535 Piedmont Road, N.E., Atlanta, Georgia 30305.
(f) "Customers" shall mean actual customers and clients
of the Company and actively solicited prospective customers and clients of the
Company.
(g) "Duties" shall mean the duties set forth on Exhibit
"B" attached hereto and made a part hereof. As and when the duties of the
Associate materially change, the Parties agree to amend Exhibit "B" to reflect
such changes in duties, and such other tasks as the Board of Directors, the
Chairman or the President of the Company, or their respective designees, may
assign to the Associate from time to time.
(h) "Management Services" shall mean the managing and
performing of all or part of a client's business activities or functions, in
which the provider of the services has responsibility for the function or
activity performed and for the results of such performance.
(i) "Subsidiaries" shall mean any entities in which
Norrell Corporation has greater than a 20% beneficial interest.
(j) "Trade Secrets" shall mean information that: (a)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its
<PAGE> 3
secrecy. To the extent that applicable law mandates a definition of "trade
secret" inconsistent with the foregoing definition, then the foregoing
definition shall be construed in such a manner as to be consistent with the
mandated definition under applicable law. Assuming the criteria of applicable
law are met, Trade Secrets shall include, without limitation, actual and
potential customer lists, sales and marketing information, customer account
records, training and operations material and memoranda, computer software and
systems, personnel records, code books, pricing information and financial
information concerning or relating to the business, accounts, customers,
associates and affairs of the Company or its franchisees and licensees and all
physical embodiments of the foregoing.
2. Terms of Employment; Duties.
(a) The Company employs or agrees to continue the
employment of the Associate and the Associate accepts or agrees to continue such
employment with the Company subject to the terms and conditions of this
Agreement.
(b) The Company employs or agrees to continue the
employment of the Associate to perform the Duties and the Associate agrees to
devote all of the Associate's business time to performing the Duties for the
Company, subject to the terms and conditions of this Agreement.
(c) All funds and property received by the Associate on
behalf of the Company or its parent or any affiliated corporation shall be
received and held by the Associate in trust, and the Associate shall account for
and remit all such funds to the Company.
3. Compensation.
(a) In consideration for the Associate's performing the
Associate's obligations hereunder, the Company shall pay to the Associate that
salary set forth in the Personnel Change Notice pertaining to the Associate
effective as of the date of this Agreement, subject to adjustment from time to
time by agreement of the Parties, and shall permit Associate to participate in
any present or future incentive compensation, bonus, profit-sharing, stock
option, stock purchase, pension, retirement, medical or insurance plan of the
Company as and to the extent Associate's participation in such plan(s) is
approved by the Board of Directors of the Company.
(b) The Company shall have the right to withhold any sums
otherwise payable to the Associate hereunder and to apply the same to any
indebtedness of the Associate to the Company.
(c) The Associate shall be entitled to be reimbursed in
accordance with the policies of the Company, as adopted and amended from time
to time, for all reasonable and necessary expenses incurred by the Associate in
connection with the performance of the Duties; provided Associate shall, as a
condition of such reimbursement, submit verification of the nature and amount
of such expenses in accordance with the reimbursement policies from time to
time adopted by the Company.
(d) The Associate shall not be entitled to any
compensation other than that set forth in this Section 3 for any services
rendered by the Associate in any capacity to the Company or its parent or any
affiliated corporation.
4. Termination of this Agreement.
(a) The employment of the Associate by the Company may be
terminated by either party at any time, provided that the Associate shall give
the Company no less than two (2) weeks' prior notice.
(b) Upon the termination of the Associate's employment
hereunder, the Company shall have no further obligation to the Associate or the
Associate's personal representative with respect to this Agreement, except for
base salary (exclusive of bonus) accrued hereunder and unpaid at the date of
such termination and payment of severance amounts, if any, payable in
accordance with the severance policy of the Company in effect at the time of
termination.
(c) The covenants of the Associate in Sections 5, 6, 7
and 8 shall survive the termination or replacement of this Agreement and
termination of the Associate's employment hereunder, and shall not be
extinguished by any such events.
5. Agreement Not to Compete.
In consideration of the Company's providing the Associate
with access to its Confidential Information and Trade Secrets, the Company's
training the Associate in the Business of the Company, and the Company's
agreement to employ or continue the employment of the Associate hereunder, the
Associate agrees that during the Associate's employment by the Company and for
a period of one (1) year following the termination, for any reason, of this
Agreement or of the Associate's employment with the Company, whichever shall
first occur, the Associate will not, without the prior written consent of the
Company, within the Area, either directly or indirectly, on the Associate's own
behalf or in the service or on behalf of others, affiliate with any Competing
Business as either (i) a manager, supervisor, administrator, consultant,
instructor, officer, director, employee, independent contractor or salesperson
providing services the same as or substantially similar to the Duties, or (ii)
as a shareholder or owner of any equity interests in any Competing Business
other than up to a five percent (5%) ownership of publicly traded equity
interests of a Competing Business.
6. Agreement Not to Solicit Customers.
In consideration of the Company's providing the Associate
with access to its Confidential Information and Trade Secrets, the Company's
training the Associate in the Business of the Company and the Company's
agreement to employ or continue the employment of the Associate hereunder, the
Associate agrees that during the Associate's employment by the Company and for
a period of one (1) year following the termination, for any reason, of this
Agreement or of the Associate's employment with the Company, whichever shall
first occur, the Associate will not, without the prior written consent of the
Company, either directly or indirectly, on the Associate's own behalf or in the
service or on behalf of others, solicit, or attempt to solicit, any Customer
(i) whose account with the Company was sold, serviced or actively solicited by
or under the supervision of the Associate during the two (2) years preceding
the termination of such employment or (ii) that is otherwise located in the
Area, for the purpose of providing such Customer or having such Customer
provided with services
2
<PAGE> 4
competitive with those that have been offered by the Company to such Customer.
The foregoing subsection (ii) shall not apply where the Area is defined as the
United States or the United States and Canada.
7. Agreement Not to Solicit Personnel.
In consideration of the Company's providing the Associate
with access to its Confidential Information and Trade Secrets, the Company's
training the Associate in the Business of the Company and the Company's
agreement to employ or continue the employment of the Associate hereunder, the
Associate agrees that during the Associate's employment by the Company and for
a period of one (1) year following the termination, for whatever reason, of
this Agreement or of the Associate's employment with the Company, the Associate
will not, either directly or indirectly, on the Associate's own behalf or in
the service or on behalf of others, solicit away or attempt to solicit away to
any Competing Business (i) any person employed by or under an independent
contractor relationship with the Company or any franchisee or licensee of the
Company within the Area, whether or not such person is a full-time associate or
a temporary employee of the Company or such franchisee or licensee, and whether
or not such employment is pursuant to written agreement and whether or not such
employment is for a determined period or is at will, or (ii) any person or
entity that is a franchisee or licensee of the Company within the Area, nor
will Associate at any time during such period, either directly or indirectly,
induce or attempt to induce any such employee, franchisee or licensee to
terminate, breach or otherwise fail fully to perform any employment agreement,
franchise or license agreement with the Company.
8. Ownership and Non-disclosure and Non-use of Confidential
Information.
(a) In consideration of the Associate's receipt of and
access to confidential information, the Associate acknowledges and agrees that
all Confidential Information and Trade Secrets of the Company, and all physical
embodiments thereof, are confidential to and shall be and remain the sole and
exclusive property of the Company. Upon request by the Company, and in any event
upon termination of the Associate's employment with the Company for any reason,
as a prior condition to receiving any final wage or salary check or any employee
benefit payment, the Associate shall promptly deliver to the Company all
property belonging to the Company including, without limitation, all
Confidential Information and Trade Secrets of the Company (and all embodiments
thereof) then in the Associate's custody, control or possession, but any
forfeiture of such wage or salary check or any employee benefit payment shall
not be considered as satisfaction or a release of or liquidated damages for any
claims for damages against the Associate which may accrue to the Company as a
result of any breach of this Section 8(a) by the Associate.
(b) In consideration of the Company's providing the
Associate with access to its Confidential Information and Trade Secrets, the
Company's training the Associate in the Business of the Company and the
Company's agreement to employ or continue the employment of the Associate
hereunder, the Associate agrees that the Associate will not, either during the
term of the Associate's employment by the Company or, in the case of
Confidential Information, for three (3) years thereafter and, in the case of
Trade Secrets, for the life of the trade secret, without the prior written
consent of the Company, disclose or make available any Confidential Information
or Trade Secret to any person or entity or make or cause to be made or permit or
allow, either on the Associate's own behalf or on behalf of others, any use of
any Confidential Information or Trade Secret other than in the proper
performance of the Associate's duties hereunder. The Company agrees that the
Associate is not prohibited hereby from disclosing or using any Confidential
Information or Trade Secret which the Associate is required to disclose pursuant
to a requirement of a governmental agency or of law without similar restrictions
or other protections against public disclosure, provided, however, that the
Associate shall first have given written notice of such required disclosure to
the Company and have taken reasonable steps to allow the Company to seek to
protect the confidentiality of the information required to be disclosed.
9. Inventions.
(a) The Associate agrees that all Subject Inventions (as
defined below) conceived or first practiced by the Associate during his or her
employment by the Company, and all patent rights and copyrights to the Subject
Inventions shall become the property of the Company, and the Associate hereby
irrevocably assigns to the Company all of the Associate's rights to all Subject
Inventions. "Subject Invention" means any Invention (as defined below) which is
conceived by the Associate alone or in a joint effort with others during the
Associate's employment by the Company which (i) may be reasonably expected to be
used in a product of the Company; (ii) results from work that the Associate has
been assigned as part of his or her duties as an employee of the Company; (iii)
is in an area of technology which is the same as or substantially related to the
areas of technology with which the Associate is involved in the performance of
his or her duties as an employee of the Company; or (iv) is useful, or which the
Associate reasonably expects may be useful, in any manufacturing or product
design process of the Company. "Invention" means any discovery, whether or not
patentable, including, but not limited to, any useful process, method, formula,
technique, machine, manufacture, composition of matter, algorithm or computer
program, as well as improvements thereto, which is new or which the Associate
has a reasonable basis to believe may be new.
(b) The Associate agrees that if he or she conceives an
Invention during his or her employment and there is a reasonable basis to
believe that the Invention is a Subject Invention, the Associate will promptly
provide a written description of the Invention to the Company adequate to allow
evaluation for a determination as to whether the Invention is a Subject
Invention. If the Associate is required by his or her supervisor as a part of
the Associate's duties to maintain an engineering or similar notebook, the
proper maintenance of the notebook shall satisfy the requirement of providing a
written disclosure of any Subject Inventions. It is agreed that all the
notebooks and written disclosures are the property of the Company.
(c) If, upon commencement of the Associate's employment
with the Company, the Associate has previously conceived an Invention or
acquired any ownership interest in any Invention, which: (i) is the Associate's
property, or of which the Associate is a joint owner with another person or
company; (ii) is not described in any issued patent as of the commencement of
the Associate's employment with Company; and (iii) would be a Subject Invention
if such Invention were made while a Company employee; then the Associate must,
at the Associate's election, either: (i) provide the Company with a written
description of the Invention on Exhibit C, if any, in which case the written
description (but no rights to the Invention) shall become the property of the
Company; or (ii) provide the
3
<PAGE> 5
Company with the license described in Section 9(d) of this Agreement.
(d) If the Associate has previously conceived or acquired
any ownership interest in an Invention described above in Section 9(c) and the
Associate elects not to disclose the same to the Company as provided above, then
the Associate hereby grants to the Company a nonexclusive, paid up, royalty-free
license to use and practice the Invention, including a license under all patents
to issue in any country which pertain to the Invention.
(e) The Associate owns no patents, individually or
jointly with others, except those described on Exhibit C, if any.
10. Patent Applications.
(a) The Associate agrees that should the Company elect to
file an application for patent protection, either in the United States or in any
foreign country on a Subject Invention of which the Associate was an inventor,
the Associate will execute all necessary documentation relating to the patent
applications, including formal assignments to the Company.
(b) The Associate further agrees that he or she will
cooperate with attorneys or other persons designated by the Company by
explaining the nature of any Subject Invention for which the Company elects to
file an application for patent protection, reviewing applications and other
papers and providing any other cooperation required for prosecution of the
patent applications. The Company will be responsible for all expenses incurred
for the preparation and prosecution of all patent applications on Subject
Inventions assigned to the Company.
11. Copyrights.
(a) The Associate agrees that any Works (as defined
below) created by the Associate in the course of the Associate's duties as an
employee of the Company constitute "Work for Hire" as defined in Sections 101
and 201 of the United States Copyright Law, Title 17 of the United States Code.
"Work" means a copyrightable work of authorship, including without limitation,
any technical descriptions for products, user's guides, illustrations,
advertising materials, computer programs (including the contents of read only
memories) and any contribution to such materials. All right, title and interest
to copyrights in all Works which have been or will be prepared by the Associate
within the scope of his or her employment with the Company will be the property
of the Company. The Associate acknowledges and agrees that, to the extent the
provisions of Title 17 of the United States Code do not vest in the Company the
copyrights to any Works, the Associate hereby assigns to the Company all right,
title and interest to copyrights which the Associate may have in the Works.
(b) The Associate agrees to disclose to the Company all
Works referred to in Section 11(a) and will execute and deliver all
applications, registrations, and documents relating to the copyrights to the
Works and will provide assistance to secure the Company's title to the
copyrights in the Works. The Company will be responsible for all expenses
incurred in connection with the registration of all the copyrights.
(c) The Associate claims no ownership rights in any
Works, except those described on Exhibit C, if any.
12. Contracts or Other Agreements with Former Employer or
Business.
(a) The Associate agrees that he or she will provide to
the Company, upon the execution and delivery of this Agreement, a copy of the
pertinent portions of any employment agreement or similar document (described on
Exhibit C, if any), executed by the Associate with a former employer or any
business with which the Associate has been associated, which prohibits the
Associate during a period of time from: (i) competing with or participating in a
business which competes with the Associate's former employer or business; (ii)
soliciting personnel of the former employer or business to leave the former
employer's employment or to leave the business; or (iii) soliciting customers of
the former employer or business on behalf of another business.
(b) The Associate hereby represents to the Company that
he or she has not executed any agreement with any other party which purports to
require the Associate to assign any Work or any Invention created, conceived or
first practiced by the Associate during a period of time which includes the date
of his or her commencement of employment with the company, except as described
on Exhibit C, if any. The Associate will obtain and provide to the Company a
copy of the above described agreement(s).
13. Severability, Etc.
(a) The Associate agrees that the covenants and
agreements contained in Sections 5, 6, 7 and 8 of this Agreement, and the
subsections of those Sections, are of the essence of this Agreement; that each
of such covenants is reasonable and necessary to protect and preserve the
interests and properties of the Company and the Business of the Company; that
the Company is engaged in and throughout the Area in the Business of the
Company; that the Associate will perform or has performed the Duties in and
throughout the Area; that irreparable loss and damage will be suffered by the
Company should Associate breach any of such covenants and agreements; that each
of such covenants and agreements is separate, distinct and severable not only
from the other of such covenants and agreements but also from the other and
remaining provisions of this Agreement; that the unenforceability of any such
covenant or agreement shall not affect the validity or enforceability of any
other such covenant or agreement or any other provision or provisions of this
Agreement; and that, in addition to other remedies available to it, the Company
shall be entitled to both temporary and permanent injunctions to prevent a
breach or contemplated breach by Associate of any of such covenants or
agreements. In the event that the Company should seek an injunction hereunder,
the Associate waives any requirement that the Company post a bond or any other
security.
(b) The Parties intend that in the event that a court, in
construing the enforceability of any provision of this Agreement, determines
that the covenant is unenforceably broad or ambiguous, such court shall have
full power and authority to disregard or strike through any portion of the
provision that renders the provision unenforceably broad or ambiguous or to
modify or to reform the provision to the extent necessary to render it
enforceable.
(c) In the event that the Associate shall breach any of
the covenants set forth in Section 5, 6, 7 or 8 hereof, the running of the
period of the restriction set forth in such Section shall be tolled during the
continuation of any such
4
<PAGE> 6
breach by the Associate for a period of not more than two (2) years, and the
running of the period of such restrictions shall commence only upon compliance
by the Associate with the terms of the applicable Section.
14. No Set-off by Associate.
The existence of any claim, demand, action or cause of action
by the Associate against the Company, or any parent, subsidiary or affiliate of
the Company, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of any of its rights
hereunder.
15. Amendment.
This Agreement and the Exhibits attached hereto, which are
all hereby incorporated into and made a part of this Agreement, may be altered,
amended, modified or superseded only in a writing executed by both of the
Parties hereto. Notwithstanding anything to the contrary in this Agreement, any
Exhibit hereto which is amended or superseded shall, for the purposes of
Sections 5, 6 and 7 hereof only, remain effective for a period of one (1) year
from the effective date of the Exhibit amending or superseding it.
16. Assignment; Entire Agreement.
(a) This Agreement may be assigned by the Company and
shall inure to the benefit of any such assignee. The waiver by the Company of
any breach of this Agreement by the Associate shall not be effective unless in
writing, and no such waiver shall constitute the waiver of the same or another
breach on a different occasion.
(b) This Agreement and those provisions of prior
employment agreements (if any) between the Associate and the Company which are
expressly stated to survive the termination or the replacement of any such
agreement embody the entire agreement of the parties hereto relating to the
employment by the Company of the Associate in the capacity herein stated.
17. Acknowledgement.
THE ASSOCIATE ACKNOWLEDGES THAT HE OR SHE HAS BEEN PROVIDED
WITH AMPLE TIME TO CAREFULLY REVIEW EACH OF THE PROVISIONS OF THIS AGREEMENT AND
TO CONSULT WITH COUNSEL OF HIS OR HER CHOICE, AND THAT HE OR SHE FULLY
UNDERSTANDS EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company and the Associate have each
caused this Agreement to be executed and delivered as of the date first shown
above.
THE COMPANY:
NORRELL CORPORATION
By:
------------------------------------
Title:
---------------------------------
THE ASSOCIATE:
- - ---------------------------------------(Signature)
- - ---------------------------------------(Print or type name here)
5
<PAGE> 7
EXHIBIT A
Effective as of________________, 199___.
The Area shall be that territory located within a_____________
(_____) mile radius of each of the following offices of the Company:
THE COMPANY:
NORRELL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
THE ASSOCIATE:
--------------------------------------
(Signature)
--------------------------------------
(Print or type name here)
<PAGE> 8
EXHIBIT B
Effective as of________________, 199___.
The Duties of the Associate, as a_____________________________
________________of the Company shall be as follows:
THE COMPANY:
NORRELL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
THE ASSOCIATE:
--------------------------------------
(Signature)
--------------------------------------
(Print or type name here)
<PAGE> 9
EXHIBIT C
Effective as of________________, 199___.
THE COMPANY:
NORRELL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
THE ASSOCIATE:
--------------------------------------
(Signature)
--------------------------------------
(Print or type name here)
<PAGE> 1
EXHIBIT 10.40
NORRELL CORPORATION
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (the "Agreement") is entered
into as of the 17th day of December, 1998, by and between NORRELL CORPORATION
(the "Company") and [NAME] ("Employee").
W I T N E S S E T H:
WHEREAS, the Company has adopted the Norrell Corporation 1994
Stock Incentive Plan (the "Plan") which is administered by a Committee
appointed by the Company's Board of Directors (the "Committee"); and
WHEREAS, the Committee has granted to Employee an award of
restricted stock under the terms of the Plan to encourage continued loyalty and
diligence (the "Award"); and
WHEREAS, to comply with the terms of the Plan and to further
the interests of the Company and Employee, the parties hereto have set forth
the terms of such award in writing in the Agreement;
NOW, THEREFORE, for and in consideration of the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. STOCK AWARD.
a) GENERAL. Subject to the restrictions and other
conditions set forth herein, the Company hereby grants to Employee an award of #
shares of the no par value common stock of the Company. Such shares are
hereinafter referred to as the "Restricted Shares."
b) BACKGROUND. The Restricted Shares were awarded to
Employee on December 15, 1998 (the "Grant Date").
2. VESTING RESTRICTIONS.
a) GENERAL. The Restricted Shares will vest either upon
attainment of the performance criteria described in subsection (b), upon
Employee's satisfaction of the tenure of employment condition set forth in
subsection (c), or upon a change in control of the Company as set forth in
subsection (d).
b) PERFORMANCE CRITERIA. The Restricted Shares will
vest immediately if both of the following performance criteria are satisfied in
any fiscal year of the Company ending on or before November 5, 2001:
<PAGE> 2
i) the Company has revenues of at least $2 billion; and
ii) the Company has attained either (A) $100 million in
pretax profits or (B) $2.25 reported earnings per
share.
The determination of whether such performance criteria have been
satisfied shall be made by the Compensation Committee acting in good faith, and
such determination shall be binding on the Employee.
c) TENURE OF EMPLOYMENT. If Employee remains
continuously employed by the Company or any of its subsidiaries until December
31, 2007 (that is, for at least 9 years from the Grant Date), any of the
Restricted Shares that have not yet vested will do so on said date, and Employee
thereupon will become vested in all such Restricted Shares.
d) CHANGE IN CONTROL. Upon the date of a Change in
Control (as defined below), any of the Restricted Shares that have not yet
vested will do so on such date. A "Change in Control" shall include (A)
consummation of a merger, consolidation or other business combination of the
Company, other than a merger, consolidation or business combination which would
result in the outstanding common stock of the Company immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent or affiliate thereof) at
least 50% of the outstanding common stock of the Company or such surviving
entity (or parent or affiliate thereof) outstanding immediately after such
merger, consolidation or business combination, or (B) approval of a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets. In addition,
a Change in Control shall also be deemed to occur if, on or before November 5,
2001, any person (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")) other than Guy W. Millner
and his affiliates becomes the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of the Company representing 30% or
more of the Company's then-outstanding voting securities, provided that the
Restricted Shares shall vest only if following such event either (i) the Company
involuntarily terminates the Employee's employment, or (ii) the performance
criteria described in subsection (b) become unattainable as a result of actions
taken by such person acquiring such beneficial ownership of the Company's
securities.
3. FORFEITURE UPON TERMINATION OF EMPLOYMENT. If Employee's
employment with the Company and all of its subsidiaries terminates for any
reason, any Restricted Shares that are not then vested under Section 2 shall be
immediately forfeited, and Employee shall have no rights in such Restricted
Shares.
4. DELIVERY OF STOCK CERTIFICATE. The certificate representing
the Restricted Shares shall be held in escrow by the Company during the period
that such shares have not vested under Section 2. Within a reasonable time after
the Restricted Shares become vested, the Company shall deliver a stock
certificate representing such vested Restricted Shares in the name of Employee.
2
<PAGE> 3
5. AGREEMENT OF EMPLOYEE. Employee acknowledges that certain
restrictions under state or federal securities laws may apply with respect to
the Restricted Shares granted to him pursuant to the Award. Specifically,
Employee acknowledges that, to the extent he is an "affiliate" of the Company
(as that term is defined by the Securities Act of 1933), the Restricted Shares
granted to him as a result of the Award are subject to certain trading
restrictions under applicable securities laws (including particularly the
Securities and Exchange Commission's Rule 144). Employee hereby agrees to
execute such documents and take such actions as the Company may reasonably
require with respect to state and federal securities laws and any restrictions
on the resale of such shares which may pertain under such laws.
6. EXECUTION OF AGREEMENT. Employee shall execute this Agreement
within 30 days after receipt of same, or the Agreement and the Award shall be
null and void ab initio.
7. WITHHOLDING. Employee shall pay an amount equal to the amount
of all applicable federal, state and local employment taxes which the Company is
required to withhold at any time. Such payment may be made in cash, by
withholding from Employees' normal pay, or by delivery of shares of the
Company's common stock (including shares then vesting under this Agreement).
8. PLAN PROVISIONS. In addition to the terms and conditions set
forth herein, the Award is subject to and governed by the terms and conditions
set forth in the Plan, which is hereby incorporated by reference. Any terms used
herein with an initial capital letter shall have the same meaning as provided in
the Plan, unless otherwise specified herein. In the event of any conflict
between the provisions of the Agreement and the Plan, the Plan shall control.
9. MISCELLANEOUS.
a) LIMITATION OF RIGHTS. The granting of the Award and
the execution of the Agreement shall not give Employee any rights to similar
grants in future years or any right to be retained in the employ or service of
the Company or any of its subsidiaries or to interfere in any way with the right
of the Company or any such Subsidiary to terminate Employee's employment or
services at any time or the right of Employee to terminate his employment at any
time.
b) SHAREHOLDER RIGHTS. During the period that any shares
of Restricted Stock remain unvested and subject to forfeiture under Section 3,
the Employee shall retain all rights of a shareholder of the Company with
respect to such shares, including the right to vote such shares and the right to
receive dividends paid in respect of such shares.
c) SEVERABILITY. If any term, provision, covenant or
restriction contained in the Agreement is held by a court or a federal
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in the Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated.
3
<PAGE> 4
d) CONTROLLING LAW. The Agreement is being made in
Georgia and shall be construed and enforced in accordance with the laws of that
state.
e) CONSTRUCTION. The Agreement contains the entire
understanding between the parties and supersedes any prior understanding and
agreements between them representing the subject matter hereof. There are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter hereof which
are not fully expressed herein.
f) AMENDMENT. Any amendment to this Agreement must be in
writing and signed by both the Company and the Employee.
g) HEADINGS. Section and other headings contained in the
Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of the
Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed the
Agreement as of day and year first set forth above.
NORRELL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
EMPLOYEE
[NAME]
-----------------------------------------
-----------------------------------------
4
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
SUBSIDIARIES OF NORRELL CORPORATION STATE OF INCORPORATION
- - ----------------------------------- ----------------------
<S> <C>
Norrell Services, Inc. Georgia
Norrell Services International, Inc. Georgia
Norrell Services, Ltd. Canada
Norrell Temporary Services, Inc. Georgia
Dynamic Temporary Services, Inc. Georgia
Norrell Acquisition Corp. Delaware
Norrell Health Care, Inc. Georgia
Tascor Incorporated Georgia
HealthTask Corporation* Delaware
HealthTask L.P.** Delaware
The Executive Speaker, Inc. Florida
HCA - Home Care Services, Inc. New York
Norrell Health Care of New York, Inc. New York
Norrell Asset Management Company Nevada
Norrell Licensing Company Nevada
Norrell Finance Company Nevada
Norrell Enterprises Corporation Nevada
Norrell Resources Corporation Delaware
NC Holding Corporation Georgia
CallTask Incorporated Georgia
Valley Temporary Services, Inc. Arizona
Manzanita Resources, Inc. Arizona
Norrell Information Services, Inc. Georgia
NorCross Teleservices Inc. Delaware
Tascor Resources Corporation Georgia
American Technical Resources, Inc. Virginia
Comtex Information Systems, Inc. Delaware
ANATEC Asset Management Company Nevada
ATR Asset Management Company Nevada
Comtex Asset Management Company Nevada
Norrell Services of Texas, Inc. Georgia
Norrell International Ltd. Nevada
Norrell (UK) Limited United Kingdom
FSS International Limited United Kingdom
</TABLE>
* 50% owned by Norrell Corporation
50% owned by Ernst & Young Resources L.L.C.
** Limited Partnership
49% owned by Tascor Incorporated
49% owned by Ernst & Young U.S. LLP
2% owned by HealthTask Corporation as General Partner
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed Form S-8
Registration Statements File Nos. 33-82004 (1994 Stock Incentive Plan), 33-82002
(1991 Stock Option Plan), 33-82006 (Management Equity Plan), 33-82348 (Goal
Plan), 33-82350 (Horizon-Pace and Strides), 33-99934 (Employee Stock Purchase
Plan) and 333-20459 (Comtex Information Systems, Inc. Stock Option Plan).
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 5, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-01-1998
<PERIOD-START> NOV-03-1997
<PERIOD-END> NOV-01-1998
<EXCHANGE-RATE> 1
<CASH> 9,871
<SECURITIES> 0
<RECEIVABLES> 227,924
<ALLOWANCES> 7,351
<INVENTORY> 0
<CURRENT-ASSETS> 241,760
<PP&E> 47,244
<DEPRECIATION> 19,321
<TOTAL-ASSETS> 509,284
<CURRENT-LIABILITIES> 137,626
<BONDS> 0
0
0
<COMMON> 276
<OTHER-SE> 230,023
<TOTAL-LIABILITY-AND-EQUITY> 509,284
<SALES> 0
<TOTAL-REVENUES> 1,410,518
<CGS> 0
<TOTAL-COSTS> 1,091,985
<OTHER-EXPENSES> 3,876<F1>
<LOSS-PROVISION> 2,436
<INTEREST-EXPENSE> 5,102
<INCOME-PRETAX> 58,877
<INCOME-TAX> 22,078
<INCOME-CONTINUING> 36,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,799
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.29
<FN>
<F1>Amount included in Other Expenses represents Y2K costs.
</FN>
</TABLE>
