<PAGE> 1
Registration No. 333-38356
As filed with the Securities and Exchange Commission on June 28, 2000.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3/A
AMENDMENT
NO. 1 TO
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
TEAMSTAFF, INC.
(Exact name of Registrant as specified in charter)
New Jersey 22-1899798
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
300 Atrium Drive
Somerset, New Jersey 08873
(732) 748-1700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------
Donald W. Kappauf
President and Chief Executive Officer
300 Atrium Drive
Somerset, New Jersey 08873
(732) 748-1700
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
Brian C. Daughney, Esq.
Goldstein & DiGioia, LLP
369 Lexington Avenue
New York, New York 10017
Telephone (212) 599-3322
Facsimile (212) 557-0295
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plan, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
<PAGE> 2
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
-------------------.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
---------------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE*
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Proposed
Propose Maximum
Maximum Offering Amount of
Title of Each Class of Securities Amount to be Offering Price Aggregate Registration
Being Registered Registered per Share(1) Price(1) Fee
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value(2)................... 8,545,344 $1.109375 $9,479,991 $2,502.72
----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par
value(3)................... 450,000 $1.109375 $499,219 $131.79
----------------------------------------------------------------------------------------------------------------------------
Total...................... 8,995,344 $ $2,634.51(4)
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</TABLE>
* Effective June 2, 2000, the Company's common stock was subject to a
reverse stock split at the ratio of 1:3.5, which is not reflected in this
Table.
(1) Estimated solely for the purpose of determining the registration fee,
based on a share price of $1.109375 the average of the closing bid and
asked prices as quoted by the Nasdaq SmallCap Market on May 26, 2000.
(2) Shares of Common Stock to be sold by certain Selling Security Holders.
(3) Shares of Common Stock issuable upon exercise of outstanding Common Stock
Purchase Warrants held by certain Selling Security Holders. Pursuant to
Rule 416, there are also being registered such additional number of
shares of Common Stock as may become issuable pursuant to the
anti-dilution provisions of the Warrants.
(4) Filing fee has previously been paid.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(a) MAY
DETERMINE.
===============================================================================
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion, June __, 2000
P R O S P E C T U S
2,570,098 Shares of Common Stock
TEAMSTAFF, INC.
We are registering for resale 2,441,527 shares of common stock, $.001 par
value of TeamStaff, Inc., which shares are presently issued and outstanding and
held by certain of our shareholders and an additional 128,571 shares of common
stock which we will issue upon the exercise of outstanding common stock purchase
warrants held by the holders of outstanding warrants.
Our Common Stock is traded in the over-the-counter market and is included
in the SmallCap Market of the Nasdaq Stock Market under the symbol "TSTF". On
June 19, 2000, the closing high and low prices for the Common Stock as reported
by Nasdaq were $4.00 and $3.8125, respectively.
We will not receive any proceeds from the sale of the shares by the
selling security holders.
The shares may be sold from time to time by the selling security holders,
or by their transferees. No underwriting arrangements have been entered into by
the selling security holders. The distribution of the shares by the selling
security holders may be effected in one or more transactions that may take place
on the over the counter market, including ordinary brokers transactions,
privately negotiated transactions or through sales to one or more dealers for
resale of the shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the selling security holders in connection with such
sales. The selling security holders and intermediaries through whom such shares
are sold may be deemed underwriters within the meaning of the Act, with respect
to the shares offered by them.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 11 TO READ ABOUT CERTAIN
FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is June __, 2000
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TABLE OF CONTENTS
<TABLE>
Page
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<S> <C>
AVAILABLE INFORMATION..........................................................................1
INCORPORATION BY REFERENCE.....................................................................1
PROSPECTUS SUMMARY.............................................................................3
THE OFFERING...................................................................................8
SELECTED FINANCIAL DATA........................................................................9
RISK FACTORS..................................................................................10
SELLING SECURITY HOLDERS......................................................................16
PLAN OF DISTRIBUTION..........................................................................18
REPORTS TO SHAREHOLDERS.......................................................................19
LEGAL MATTERS AND EXPERTS.....................................................................19
ADDITIONAL INFORMATION........................................................................19
FORWARD LOOKING STATEMENTS ...................................................................20
</TABLE>
iv
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AVAILABLE INFORMATION
Our company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information filed by our company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, 500 West Madison
Street, Room 1400, Chicago, Illinois 60661. Copies of such material may be
obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintain an Internet site, http://www.sec.gov, that
contains reports, proxy and information statements and other information that we
file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by TeamStaff with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. Our Annual Report on Form 10-K for the fiscal year ended September
30, 1999, including information specifically incorporated by
reference into our Form 10-K from our definitive Proxy Statement.
2. A description of our common stock contained in our registration
statement on Form 8-A filed April 27, 1990.
3. Our Form 8-K filed on April 20, 2000.
4. Our Form 10-Q for the quarter ended December 31, 1999.
5. Our Form 10-Q for the quarter ended March 31, 2000.
6. Our form 8-K filed on June 15, 2000.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference in this
Prospectus and shall be part hereof from the date of filing of such document.
All documents filed by the registrant after the date of filing the
initial registration statement on Form S-3 of which this prospectus forms a part
and prior to the effectiveness of such registration statement pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange
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Act of 1934 shall be deemed to be incorporated by reference into this prospectus
and to be part hereof from the date of filing of such documents.
We will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any document described above (other than exhibits). Requests for such
copies should be directed to TeamStaff, Inc., 300 Atrium Drive, Somerset, New
Jersey 08873, telephone (732) 748-1700, attention Donald Kelly.
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PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts
and highlights from material contained in the our company's annual report on
Form 10-K for the fiscal year ended September 30, 1999 (the "Form 10-K") and our
quarterly reports on Form 10-Q for the quarters ended December 31, 1999 and
March 31, 2000 (the "Forms 10-Q"), incorporated by reference into this
prospectus.
THE COMPANY
TeamStaff, Inc., formerly Digital Solutions, Inc., a New Jersey
corporation, was founded in 1969 as a payroll service company and has evolved
into a leading provider of human resource management services to a wide variety
of industries in 50 states. TeamStaff's wholly-owned subsidiaries include
TeamStaff Solutions, Inc., DSI Staff ConnXions-Northeast, DSI Staff
ConnXions-Southwest, TeamStaff Rx, Inc., TeamStaff I, Inc., TeamStaff II, Inc.,
TeamStaff III, Inc., TeamStaff IV, Inc., TeamStaff V, Inc., TeamStaff VI, Inc.,
TeamStaff Insurance, Inc., TeamStaff VII, Inc., TeamStaff VIII, Inc., and
TeamStaff IX, Inc.
Effective January 25, 1999, we acquired the ten entities operating under
the trade name, the TeamStaff Companies. In conjunction with the acquisition, we
changed our name from Digital Solutions, Inc., to TeamStaff, Inc. on February
10, 1999. In connection with the acquisition, we issued 8,233,334 shares of
common stock, which shares are being registered in this prospectus.
On April 8, 2000, pursuant to a definitive Asset Purchase Agreement,
dated April 7, 2000, we acquired to acquire substantially all of the assets of
the professional employer organization business of Outsource International,
Inc., which had operated under the tradename Synadyne. The assets were acquired
through one of our wholly-owned subsidiaries, of which Outsource had indirectly
held a 20% ownership interest. We subsequently purchased the 20% ownership
interest. We also acquired the tradename Synadyne as part of the transaction, as
well as all of the customer contracts of Synadyne's PEO business.
We currently provide three types of services related to the employee
leasing, temporary staffing and payroll service businesses: (1) professional
employer organization ("PEO") services, such as payroll processing, personnel
and administration, benefits administration, workers' compensation
administration and tax filing; (2) employer administrative services, such as
payroll processing and tax filing; and (3) contract staffing, or the placement
of temporary and permanent employees. We currently furnish PEO employees,
payroll and contract staffing services with over 20,000 work site employees,
1,500 staffing employees and processing for approximately 30,000 payroll service
employees and believes that it currently ranks, in terms of revenues and
worksite employees, as one of the top 10 PEOs in the United States. Our contract
staffing business mainly places temporary help in hospitals and clinics
throughout the United States through its Clearwater, Florida and Houston, Texas
offices. We have six regional offices located in Somerset, New Jersey; Houston
and El Paso, Texas; and Tampa, Delray Beach and Clearwater, Florida and
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nine sales service centers in New York, New York; El Paso and Houston, Texas;
Tampa, Orlando, Delray Beach and Clearwater, Florida; Atlanta, Georgia; and
Somerset, New Jersey.
Essentially, we provide services that function as the personnel
department for small to medium sized companies. We believe that by offering
services that relieve small and medium size businesses of the ever increasing
administrative burden of employee related record keeping, payroll processing,
benefits administration, employment of temporary and permanent specialized
employees and other human resource functions, we have positioned our company to
take advantage of a major growth opportunity during this decade and the next.
Recognizing the desire by many small businesses to be relieved of the
human resource administrative functions, we have formulated a strategy of
emphasizing PEO and "outsourcing" services. In PEO, a service provider becomes a
co-employer of the client company's employees and assigns these employees to the
client to perform their intended functions at the worksite.
Management has determined to emphasize our company's future growth on the
PEO and outsourcing industry. Our expansion program will focus on internal
growth through the cross marketing of our PEO services to our entire client base
and the acquisition of compatible businesses strategically situated in new areas
or with a client base serviceable from existing facilities. As part of our
effort to expand our PEO business, management has expanded the services of
TeamStaff Rx, Inc., our company's medical contract staffing subsidiary, to
include PEO, outsourcing and facilities management. While we continue to sell
stand-alone employer services, such as payroll and tax filing, we also will
emphasize the PEO component of our service offerings with a goal of becoming the
leading provider of PEO services in the United States. A major component of our
existing growth strategy is the acquisition of well-situated, independent PEO
companies whose business can be integrated into our company's operations.
However, there can be no assurance any such acquisition will be consummated.
Our company was organized under the laws of the State of New Jersey on
November 25, 1969 and maintains its executive offices at 300 Atrium Drive,
Somerset, New Jersey 08873 where our telephone number is (732) 748-1700.
OUR SERVICES
Professional Employer Organization (PEO)
Our company's core business, and the area management will continue to
emphasize, is our PEO services. When a client utilizes our services, the client
administratively transfers all or some of its employees to us and we in turn
provide them back to the client. Our company thereby becomes a co-employer and
is responsible for all human resource functions, including payroll, benefits
administration, tax reporting and personnel record keeping. The client still
manages the employees and determines salary and duties in the same fashion as
any employer. The client is, however, relieved of reporting and tax filing
requirements and other administrative tasks.
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Moreover, because of economies of scale, our company is able to negotiate
favorable terms on workers' compensation insurance, health benefits, retirement
programs, and other valuable services. The client company benefits because it
can then offer its employees the same or similar benefits as larger companies,
enabling it to successfully compete in recruiting highly qualified personnel, as
well as build the morale and loyalty of its staff.
As a PEO service provider, we can offer the following benefits to
employees:
COMPREHENSIVE MAJOR MEDICAL PLANS - Management believes that medical
insurance costs have forced small employers to reduce coverage provided to its
employees and to increase employee contributions. We are able to leverage our
large employee base and offer the employees assigned to their clients a variety
of health coverage plans from traditional indemnity plans to Health Maintenance
Organizations (HMO), Preferred Provider Organizations (PPO), or a Point of
Service Plan (POS).
DENTAL AND VISION COVERAGE - These types of benefits are generally beyond
the reach of most small groups. As a result of economies of scale available, a
client of our company can obtain these benefits for the assigned employees.
LIFE INSURANCE -- Affordable basic coverage is available.
SECTION 125 PREMIUM CONVERSION PLAN -- Employees can pay for benefits
with pre-tax earnings, reduce their taxable income and FICA payments, and
increase their take-home pay.
401(K) RETIREMENT PLANS -- Management believes that most small employers
do not provide any significant retirement benefits due to the administrative and
regulatory requirements associated with the establishment and maintenance of
retirement plans. The company enables small business owners to offer the
assigned employees retirement programs comparable to those of major
corporations. Such plans can be used to increase morale, productivity and
promote employee loyalty.
CREDIT UNION - Our company provides an opportunity for employees to
borrow money at lower interest than offered at most banks.
PAYROLL SERVICES -- Although ancillary to the PEO services, clients no
longer incur the expense of payroll processing either through in-house staff or
outside service. Our company's PEO services include all payroll and payroll tax
processing.
UNEMPLOYMENT COMPENSATION COST CONTROL - Our company provides an
unemployment compensation cost control program to aggressively manage
unemployment claims.
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HUMAN RESOURCES MANAGEMENT SERVICES - Our company can provide clients
with expertise in areas such as personnel policies and procedures, hiring and
firing, training, compensation and performance evaluation.
WORKERS' COMPENSATION PROGRAM - Our company has a national workers'
compensation policy which can provide our company with a significant advantage
in marketing its services, particularly in jurisdictions where workers'
compensation policies are difficult to obtain at reasonable costs. We also
provide our clients where applicable with independent safety analyses and risk
management services to reduce workers' injuries and claims.
Relieved of personnel administrative tasks, the client is able to focus
on its core business. The client is also offered a broader benefits package for
its assigned employees, a competitive rate in workers' compensation insurance,
and savings in time and paperwork previously required in connection with
personnel administration.
PAYROLL SERVICES
We were established as a payroll service firm in 1969, and continue to
provide basic payroll services to our clients. Historically, the payroll
division provided these services primarily to the construction industry and
currently 70% of our company's approximately 750 payroll service clients are in
the construction industry. Our company offers most, if not all, of what other
payroll services provide, including the preparation of checks, government
reports, W-2's (including magnetic tape filings), remote processing (via modem)
directly to the clients offices, and certified payrolls.
In addition, our company offers a wide array of tax reporting services
including timely deposit of taxes, impounding of tax payments, filing of
returns, distribution of quarterly and year-end statements and responding to
agency inquiries.
TEMPORARY STAFFING SERVICES
We provide temporary staffing services through two subsidiaries which
have, in the aggregate, more than 30 years of experience in placing permanent
and temporary employees with specialized skills and talents with regional,
national and international employers. Temporary staffing enables clients to
attain management and productivity goals by matching highly trained
professionals and technical personnel to specific project requirements.
TeamStaff focuses its temporary staffing services in two specific markets where
it places people on a temporary long term assignment, or on a permanent basis:
(1) radiologic technologist, diagnostic sonographers, cardiovascular
technologists, radiation therapist and other medical professionals with
hospitals, clinics and therapy centers throughout the 50 states and (2)
technical employees such as engineers, information systems specialists and
project managers primarily with Fortune 100 companies for specific projects.
Clients whose staffing requirements vary depending on the level of current
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We provide temporary staffing services through two subsidiaries which
have, in the aggregate, more than 30 years of experience in placing permanent
and temporary employees with specialized skills and talents with regional,
national and international employers. Temporary staffing enables clients to
attain management and productivity goals by matching highly trained
professionals and technical personnel to specific project requirements.
TeamStaff focuses its temporary staffing services in two specific markets where
it places people on a temporary long term assignment, or on a permanent basis:
(1) radiologic technologist, diagnostic sonographers, cardiovascular
technologists, radiation therapist and other medical professionals with
hospitals, clinics and therapy centers throughout the 50 states and (2)
technical employees such as engineers, information systems specialists and
project managers primarily with Fortune 100 companies for specific projects.
Clients whose staffing requirements vary depending on the level of current
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projects or business are able to secure the services of highly qualified
individuals on an interim basis.
Our company's temporary staffing services provide clients with the
ability to "rightsize"; that is, expand or reduce its workforce in response to
changing business conditions. Management believes that these services provide
numerous benefits to the client, such as saving the costs of salary and benefits
of a permanent employee whose services are not needed throughout the year. The
client also avoids the costs, uncertainty and delays associated with searches
for qualified interim employees. Our company also provides insurance bonding
where necessary and assumes all responsibility for payroll tax filing and
reporting functions, thereby saving the client administrative responsibility for
all payroll, workers' compensation, unemployment and medical benefits.
Management believes that its temporary staffing services provides an
employer with an increased pool of qualified applicants, since temporary
staffing employees have access to a wide array of benefits such as health and
life insurance, Section 125 premium conversion plans, and 401(k) retirement
plans. These benefits provide interim employees with the motivation of full-time
workers without additional benefit costs to the client. A client is also able to
temporarily rehire a retired employee for short-term or specialized projects
without jeopardizing their pension plan. We believe that we have attained the
position of being number one or two in the terms of gross revenues for firms
specializing in the placement of temporary medical imaging personnel.
THE SYNADYNE ACQUISITION
Under the terms of the Asset Purchase Agreement, we paid an aggregate
purchase price of $3,500,000. The agreement also provides for an additional
potential payment in one year of up to $1,250,000 provided that the former
clients of Outsource have at least 9,500 worksite employees as of March 31,
2001. In the event there are less than 9,500 employees, the amount of the
earnout will be reduced by a pre-determined formula.
Pursuant to the terms of the Asset Purchase Agreement, Outsource has
agreed to indemnify us up to the purchase price for claims for breaches of
representations and warranties, subject an initial deductible of $50,000.
In connection with the acquisition, we received an increase in our
present lending facility with FINOVA Capital Corporation in order to fund the
acquisition and necessary working capital. The facility is comprised of a three
year term loan in the principal amount of $4,000,000, with a five year
amortization and a balloon payment at the end of three years and an increase in
our revolving line of credit from $2.5 million to $3.5 million. The term loan
bears an interest rate of prime plus 3 percent and the revolving loan bears an
interest rate of prime plus 1 percent. The term loan may be prepaid at any time
without penalty. Annual success fees of $500,000 are earned as of each
anniversary date of the loan commencing as of April 2000.
RECENT EVENTS
On May 31, 2000, at a special meeting of our shareholders, the
shareholders reaffirmed their previous approval of a reverse split of our common
stock. On April 14, 2000, our Board of Directors set and approved a reverse
split at a level of one (1) new share for each existing 3.5 shares of TeamStaff
stock. The stock split became effective June 2, 2000, and our common stock will
trade under the symbol TSTFD for approximately 20 days, after which it will
return to TSTF. All references to numbers of shares being registered in this
prospectus have been adjusted to reflect the reverse stock split, unless
otherwise stated.
As previously disclosed in our reports filed with the SEC, in August 1998
a judgment was assessed against us for $315,000, plus interest. The name of the
suit is Farias v. Thomson Consumer Electronics & DSI Staff Connxions--Southwest,
Inc., (Case No. 96-3036, D.C. El Paso County, Texas). We appealed the judgment
to the Appellate Court and were notified on May 31, 2000 that we lost our
appeal. We are currently reviewing our options, including a further appeal to
the Texas Supreme Court. We do not anticipate that this charge will have a
significant impact on our earnings.
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THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock outstanding prior to
Offering(1)................................. 7,980,718
Shares being offered for
sale by selling security holders......... 2,441,527
Shares underlying warrants being
offered for sale by selling
security holders............................. 128,571
Common Stock outstanding after the
Offering ...................................... 8,109,289
Risk Factors ................................. This offering involves a high degree of risk. See "Risk Factors."
Use of Proceeds(2).......................... All of the proceeds of this offering will be paid to the respective
selling security holders and none of the proceeds will be received by
our company. We anticipate that proceeds received from exercise of
any warrants will be used for working capital purposes. See "Use of
Proceeds."
Nasdaq SmallCap
Market Symbol.......................... TSTF
</TABLE>
----------------
(1) As of June 13, 2000. Does not include:
- Options to purchase 1,714,285 Shares reserved for issuance under
our 2000 Employee Stock Option Plan of which none are issued and
outstanding and options to purchase 44,542 Shares issued and
outstanding under our 1990 Employee Stock Option Plan, which
expired in April, 2000.
- Options to purchase 181,428 Shares issued and outstanding under
our 1990 Senior Management Plan, which expired in April, 2000.
- Options to purchase 30,714 Shares issued and outstanding under
our 1990 Non-Executive Director Plan, which expired in April,
2000. At our most recent annual meeting on April 13, 2000, our
stockholders approved our 2000 Non-Executive Director Stock
Option Plan, pursuant to which no options have been granted.
- Up to approximately 228,536 Shares reserved for issuance upon
exercise of outstanding warrants.
(2) We will receive approximately $578,998.33 in proceeds if all of the warrants
being registered in this prospectus are exercised.
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SELECTED FINANCIAL DATA
(amounts in thousands, except per share data)
The following table sets forth selected consolidated financial data of our
historical operations for each of the five years in the period ended September
30, 1999 and for each of the six month periods ended March 31, 1999 and 2000,
respectively. The selected financial data related to (Loss) Earnings per share
and weighted average shares outstanding have been restated for all periods
presented to consider the 3.5 for 1 reverse stock split that was effective June
2, 2000.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, Six Months Ended March 31,
----------------------------------------------------------------------- --------------------------
1995 1996 1997 1998 1999(2) 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 73,821 $ 100,927 $ 122,559 $139,435 $244,830 $94,947 $161,824
Direct Expenses 68,530 92,490 113,894 129,747 228,294 88,343 152,443
Gross Profit 5,291 8,437 8,665 9,688 16,536 6,604 9,381
Selling, General &
Administrative
Expenses (includes
Depreciation
and Amortization) 7,547 8,801 11,316 8,050 13,305 5,489 7,869
(Loss) Income From (2,256) (364) (2,651) 1,638 3,231 1,115 1,512
Operations
Net (Loss) Income $ (3,316) $ (597) $ (2,832) $ 2,703 $ 1,776 $ 862 $ 626
(Loss) Earnings per
share (1)
Basic $ (0.85) $ (0.12) $ (0.52) $ 0.49 $ 0.25 $ 0.14 $ 0.08
Diluted $ (0.85) $ (0.12) $ (0.52) $ 0.49 $ 0.25 $ 0.14 $ 0.08
Weighted average
shares outstanding (1)
Basic 3,884 4,812 5,449 5,506 7,128 6,274 7,958
Diluted 3,884 4,812 5,449 5,544 7,145 6,319 8,019
</TABLE>
<TABLE>
<CAPTION>
As of September 30, As of March 31,
------------------------------------------------------------------- ---------------------
BALANCE SHEET 1995 1996 1997 1998 1999(2) 1999 2000
DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Assets $ 13,816 $14,800 $ 14,163 $16,648 $36,382 $33,288 $38,786
Liabilities 10,967 7,632 9,291 8,774 19,417 17,199 20,975
Long-Term Debt 175 100 89 2,981 4,502 4,772 4,026
Working Capital
(Deficiency) (4,771) 286 (1,401) 3,319 2,968 877 4,051
Shareholders' Equity $ 2,849 $ 7,168 $ 4,872 $ 7,874 $16,965 $16,089 $17,811
</TABLE>
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1. In accordance with Statement of Accounting Standards 128, basic and
diluted earnings (loss) per shares have replaced primary and diluted
earnings (loss) per share.
2. On January 25, 1999, we acquired the TeamStaff Companies through the
issuance of 2,352 shares of TeamStaff, Inc. common stock and $3,200
in cash in exchange for all capital stock of the TeamStaff Companies
and for the repayment of debt.
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RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. The following factors, in addition to those discussed elsewhere, should be
considered carefully in evaluating us and our business. An investment in the
securities is suitable only for those investors who can bear the risk of loss of
their entire investment.
WE HAVE GRANTED TO OUR LENDER A SECURITY INTEREST IN OUR ASSETS AND UPON
A DEFAULT THE LENDER MAY FORECLOSE ON OUR ASSETS.
We have granted security interests with respect to substantially all of
our assets to secure certain of our indebtedness. In the event we default on our
secured obligations, the secured creditor could declare our indebtedness to be
immediately due and payable and foreclose on the assets securing the defaulted
indebtedness. Moreover, to the extent that all of our assets continue to be
pledged to secure outstanding indebtedness, such assets will not be available to
secure additional indebtedness. Our loan agreement with our institutional lender
restricts our ability to incur additional indebtedness and may limit our ability
to obtain additional financing on terms favorable to us or at all.
WE MAY ACQUIRE ADDITIONAL COMPANIES WHICH MAY RESULT IN ADVERSE EFFECTS
ON OUR EARNINGS.
We may at times become involved in discussions with potential acquisition
candidates. Any acquisition that we may consummate may have an adverse effect on
our liquidity and earnings and may not be profitable to us. In the event that we
consummate an acquisition or obtain additional capital through the sale of debt
or equity to finance an acquisition, current shareholders may experience
dilution in their shareholder's equity.
SIGNIFICANT GROWTH THROUGH ACQUISITIONS MAY ADVERSELY AFFECT OUR
MANAGEMENT AND OPERATING SYSTEMS.
We completed two significant acquisition during the past eighteen months
and intend to continue to pursue a strategy of acquiring compatible businesses
in the future. Our growth is making significant demands on our management,
operations and resources, including working capital. If we are not able to
effectively manage our growth, our business and operations will be materially
harmed. To manage growth effectively, we will be required to continue to improve
our operational, financial and managerial systems, procedures and controls, hire
and train new employees while managing our current operations and employees.
Historically, our cash flow from operations has been insufficient to expand
operations and sufficient capital may not be available in the future.
10
<PAGE> 16
OUR PAYROLL BUSINESS MAY BE ADVERSELY AFFECTED IF THERE IS AN ECONOMIC
DOWNTURN IN THE CONSTRUCTION BUSINESS.
Although we have expanded our services to a number of industries, our
payroll service business continues to rely to a material extent on the
construction industry. During the last fiscal year, construction related
business accounted for approximately 70% of our total gross margin. Accordingly,
if there is a slowdown in construction activities, it may affect our revenues
and profitability. Management believes our reliance on the construction business
will continue to decline as our customer base expands and becomes more
diversified.
UNFAVORABLE INTERPRETATIONS OF GOVERNMENT LAWS MAY HARM OUR OPERATIONS.
Our operations are affected by many federal, state and local laws
relating to labor, tax, insurance and employment matters and the provision of
managed care services. Many of the laws related to the employment relationship
were enacted before the development of alternative employment arrangements, such
as those that we provide, and do not specifically address the obligations and
responsibilities of non-traditional employers. The unfavorable resolution of
unsettled interpretive issues concerning our relationship could have a material
adverse effect on our results of operations, financial condition and liquidity.
Uncertainties arising under the Internal Revenue Code of 1986 include, but are
not limited to, the qualified tax status and favorable tax status of certain
benefit plans we and other alternative employers provide. In addition, new laws
and regulations may be enacted with respect to our activities which may also
have a material adverse effect on the Company's business, financial condition,
results of operations and liquidity.
OUR FINANCIAL CONDITION MAY BE AFFECTED BY INCREASES IN HEALTH CARE AND
WORKERS' COMPENSATION INSURANCE COSTS.
Health care costs, insurance premiums and workers' compensation insurance
coverage comprise a significant part of our operating expenses. Accordingly, we
use managed care procedures in an attempt to control these costs. Changes in
health care and workers' compensation laws or regulations may result in an
increase in our costs and we may not be able to immediately incorporate such
increases into the fees charged to clients because of its existing contractual
arrangements with clients. As a result, any such increases in these costs could
have a material adverse effect on our financial condition, results of operations
and liquidity.
WE MAY NOT BE ABLE TO OBTAIN ALL OF THE LICENSES AND CERTIFICATIONS THAT
WE NEED TO OPERATE.
State and federal authorities extensively regulate the managed health
care industry and some of our arrangements relating to specialty managed care
services or the maintenance or operation
11
<PAGE> 17
of health care provider networks require us to satisfy operating, licensing or
certification requirements. Any further expansion of the range of specialty
managed care services that we offer is likely to require that we satisfy
additional licensing and regulatory requirements. If we are unable to obtain or
maintain all of the required licenses or certifications that we need, we could
experience material adverse effects on our results of operations, financial
condition and liquidity.
HEALTH CARE OR WORKERS' COMPENSATION REFORM COULD IMPOSE UNEXPECTED
BURDENS ON OUR ABILITY TO CONDUCT OUR BUSINESS.
Regulation in the health care and workers' compensation fields continues
to evolve, and we cannot predict what additional government regulations
affecting our business may be adopted in the future. Changes in any of these
laws or regulations may adversely impact the demand for our services, require
that we develop new or modified services to meet the demands of the marketplace,
or require that we modify the fees that we charge for our services. Any such
changes may adversely impact our competitiveness and our financial condition.
IF WE LOSE OUR QUALIFIED STATUS FOR CERTAIN TAX PURPOSES, OUR BUSINESS
WOULD BE ADVERSELY AFFECTED.
Several years ago, the Internal Revenue Service established an Employee
Leasing Market Segment Group for the purpose of identifying specific compliance
issues prevalent in certain segments of the PEO industry. One issue that arose
in the course of these audits is whether PEOs should be considered the employers
of worksite employees under Internal Revenue Code provisions applicable to
employee benefit plans, which would permit PEOs to offer benefit plans that
qualify for favorable tax treatment to worksite employees. If the IRS concludes
that PEOs are not employers of worksite employees for purposes of the Internal
Revenue Code, we would need to respond to the following adverse implications:
-- the tax qualified status of our 401(k) plan could be revoked and
our cafeteria plan may lose its favorable tax status;
-- worksite employees would not be able to continue to participate in
such plans or in other employee benefit plans;
-- we may no longer be able to assume the client company's federal
employment tax withholding obligations;
-- if such a conclusion were applied retroactively, then employees'
vested account balances would become taxable immediately, the
Company would lose its tax deduction to the extent contributions
were not vested, the plan trust would become a taxable trust and
penalties and additional taxes for prior periods could be
assessed.
In such a circumstance, we would face the risk of client dissatisfaction
as well as potential litigation, and our financial condition, results of
operations and liquidity could be materially adversely affected.
12
<PAGE> 18
WE MAY BE HELD LIABLE FOR THE ACTIONS OF OUR CLIENTS AND EMPLOYEES AND
THEREFORE INCUR UNFORESEEN LIABILITIES.
A number of legal issues with respect to the co-employment arrangements
among PEOs, their clients and worksite employees remain unresolved. These issues
include who bears the ultimate liability for violations of employment and
discrimination laws. As a result of our status as a co-employer, we may be
liable for violations of these or other laws despite contractual protections.
While our client service agreements generally provide that the client is to
indemnify us for any liability caused by the client's failure to comply with its
contractual obligations and the requirements imposed by law, we may not be able
to collect on such a contractual indemnification claim and may then be
responsible for satisfying such liabilities. In addition, worksite employees may
be deemed to be our agents, which could make us liable for their actions.
OUR STAFFING OF HEALTHCARE PROFESSIONALS EXPOSES US TO POTENTIAL
MALPRACTICE LIABILITY.
Through our TeamStaff Rx subsidiary, we engage in the business of
contract staffing of temporary and permanent healthcare professionals. The
placement of such employees increases our potential liability for negligence and
professional malpractice of those employees. Although TeamStaff is covered by
liability insurance which we deem reasonable under the circumstances, not all of
the potential liability we face will be fully covered by insurance. Any
significant adverse claim which is not covered by insurance may have a material
adverse effect on us.
WE MAY NOT BE FULLY COVERED BY THE INSURANCE WE PROCURE.
Although we carry liability insurance, the insurance we purchase may not
be sufficient to cover any judgments, settlements or costs relating to any
present or future claims, suits or complaints. In addition, sufficient insurance
may not be available to us in the future on satisfactory terms or at all. If the
insurance we carry is not sufficient to cover any judgments, settlements or
costs relating to any present or future claims, suits or complaints, our
business, financial condition, results of operations and liquidity could be
materially adversely affected.
OUR BUSINESS WILL SUFFER IF OUR SERVICES ARE NOT COMPETITIVE.
Each of the payroll, temporary employee placement and the employee
leasing industries are characterized by vigorous competition. Since we compete
with numerous entities that have greater resources than us in each of our
business lines, our business will suffer if we are not competitive in with
respect to each of the services we provide. We believe that our major
competitors with respect to its payroll and accounting services are Automatic
Data Processing, Inc., Ceridian Corp. and Paychex, Inc. and with respect to
employee placement (including temporary placements and employee leasing), Butler
Arde, Tech Aid, Inc., Comp Health, Staff Leasing, Inc. and Administaff, Inc.
These companies have greater financial and marketing
13
<PAGE> 19
resources than do we. We also compete with manual payroll systems and
computerized payroll services provided by banks, and smaller independent
companies.
IF WE CANNOT OBTAIN SUFFICIENT LEVELS OF TEMPORARY EMPLOYEES, OUR
BUSINESS MAY BE AFFECTED.
Two of our subsidiaries, Team Solutions, and TeamStaff Rx are temporary
employment agencies which depend on a pool of qualified temporary employees
willing to accept assignments for our clients. The business of these
subsidiaries is materially dependent upon the continued availability of such
qualified temporary personnel. Our inability to secure temporary personnel would
have a material adverse effect on our business.
SINCE WE HAVE NOT PAID DIVIDENDS ON OUR COMMON STOCK YOU CANNOT EXPECT
INCOME FROM AN INVESTMENT IN OUR COMMON STOCK.
We have not paid any dividends on our common stock since our inception
and do not contemplate or anticipate paying any dividends on our common stock in
the foreseeable future. We may not pay dividends on our common stock unless we
have earnings or capital surplus and our lender prohibits us from paying
dividends without its prior consent. Therefore, holders of our common stock may
not receive any dividends on their investment in us. Earnings, if any, will be
retained and used to finance the development and expansion of our business.
WE HAVE SOLD RESTRICTED SHARES OF COMMON STOCK WHICH MAY DILUTE OUR STOCK
PRICE WHEN THEY ARE SELLABLE UNDER RULE 144.
Of the 7,980,718 issued and outstanding shares of our common stock prior
to this offering, approximately 3,183,300 shares may be deemed "restricted
shares" and, in the future, may be sold in compliance with Rule 144 under the
Act. Possible or actual sales of our common stock by our present shareholders
under Rule 144 may, in the future, have a depressing effect on the price of our
common stock in the open market. Rule 144 provides that a person holding
restricted securities which have been outstanding for a period of one year after
the later of the issuance by our company or sale by an affiliate of our company,
may sell in brokerage transactions an amount equal to 1% of our company's
outstanding common stock every three months. A person who is a "non-affiliate"
of our company and who has held restricted securities for over two years is not
subject to the aforesaid volume limitations as long as the other conditions of
the Rule are met. In addition, on a pre-reverse split basis, (1) we have
previously registered approximately 6,700,000 shares on behalf of selling
stockholders and (2) have outstanding 898,400 previously registered shares under
our stock option plans. The sale of these shares may have a depressive effect on
the market for our common stock.
14
<PAGE> 20
WE MAY ISSUE PREFERRED STOCK WITH RIGHTS SENIOR TO OUR COMMON STOCK WHICH
MAY ADVERSELY IMPACT THE VOTING AND OTHER RIGHTS OF THE HOLDERS OF OUR COMMON
STOCK.
Our certificate of incorporation authorizes the issuance of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by our board of directors up to an aggregate of
5,000,000 shares of preferred stock. Accordingly, our board of directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which would adversely affect the
voting power or other rights of the holders of our common stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of our
company, which could have the effect of discouraging bids for our company and
thereby prevent stockholders from receiving the maximum value for their shares.
Although we have no present intention to issue any shares of our preferred stock
in order to discourage or delay a change of control of our company, we may do so
in the future.
15
<PAGE> 21
SELLING SECURITY HOLDERS
<TABLE>
<CAPTION>
SHARES PERCENTAGE
OWNED SHARES OF SHARES
PRIOR TO SHARES OWNED OWNED
NAME AND ADDRESS OF OFFERING OFFERED AFTER AFTER
SECURITY HOLDER (1)(2) OFFERING OFFERING
<S> <C> <C> <C> <C>
Warren M. Cason, Sr. (11) 634,473(3) 634,473(3) - --
Kirk A. Scoggins (11) 939,123(4) 939,123(4) - -
Dorothy Cason (11) 45,811(5) 45,811(5) - --
Warren Cason, Jr., trustee, 522,825(6) 522,825(6) _ _
Dorothy C. Cason 1997
Three Year Grantor Retained Annuity Trust (11)
Melissa C. Scoggins, trustee, 206,149(7) 206,149(7) _ _
Kirk A. Scoggins 1997
Three Year Grantor Retained Annuity Trust (11)
Raymond James & Assoc., Inc. 96,289(8) 96,289(8) - -
Donald & Co. Securities, Inc. 85,714(9) 85,714(9) - -
SR Capital Partners, LLC 35,714(10) 35,714(10) - -
</TABLE>
------------------------
1. Includes all shares as to which the individual has sole or shared voting
power or investment power and also any shares that the individual has the
right to acquire within 60 days of the date of this prospectus through
the exercise of any stock option or other right. Unless otherwise
indicated in the footnotes, each individual has sole voting and
investment power (or shares such powers with his or her spouse) with
respect to the shares shown as beneficially owned).
16
<PAGE> 22
2. See "Plan of Distribution"
3. Shares directly held by listed shareholder. Does not include 526,825
shares held in the Dorothy C. Cason 1997 Three Year Grantor Retained
Annuity Trust, Warren Cason, Jr., trustee, and 45,811 shares held by
Dorothy C. Cason, his spouse.
4. Shares directly held by listed shareholder. Does not include 206,149
shares held in the Kirk A. Scoggins 1997 Three Year Grantor Retained
Annuity Trust, Melissa C. Scoggins, trustee. Does not include 28,571
shares issued to Mr. Scoggins, a director of TeamStaff, pursuant to our
Senior Management Stock Option Plan.
5. Shares directly held by listed shareholder. Does not include 526,825
shares held in the Dorothy C. Cason 1997 Three Year Grantor Retained
Annuity Trust, Warren Cason, Jr., trustee; and 634,473 shares held by
Warren M. Cason, Sr., her spouse.
6. Shares directly held by listed shareholder. Does not include 634,473
shares directly held by Warren M. Cason, Sr.; and 45,811 shares held by
Dorothy C. Cason.
7. Shares directly held by listed shareholder. Does not include 939,123
directly held by Kirk A. Scoggins.
8. 7,143 shares issuable upon exercise of warrants issued to the holder and
89,145 shares issued to the shareholder as compensation for services
rendered as our investment banker in connection with the acquisition by
Digital Solutions, Inc. of the TeamStaff companies.
9. Shares issuable upon exercise of warrants. Teamstaff retained Donald &
Co. Securities, Inc. to act as investment bankers pursuant to an
agreement dated November 29, 1999. As compensation for its services, we
issued 100,000 warrants to Donald & Co., which are exercisable at $4.151
per share. Mr. Skiptunis is an employee of Donald & Co. and received
14,286 of the warrants.
10. Shares issuable upon exercise of warrants. Mr. Raymond Skiptunis is the
principal owner and officer of SR Capital Partners, LLC. Mr. Skiptunis
served as the Chief Executive Officer of Teamstaff until 1996. 21,428 of
the warrants held by SR Capital Partners have an exercise price of $5.25
per share and 14,286 warrants are exercisable at $4.151 per share.
11. Pursuant to a registration rights agreement dated January 25, 1999, we
are only required to register 33.3% of the listed shares per year
commencing on the first anniversary of the registration rights agreement
(January 25, 2000). Certain of the shares are being held in escrow to
satisfy possible claims for indemnification which may be made under the
documents governing the acquisition of the former TeamStaff Companies.
Accordingly, the listed holder may only sell a maximum of 33.3% of the
listed shares per year following the effectiveness of this registration
statement.
17
<PAGE> 23
PLAN OF DISTRIBUTION
The common stock covered by this prospectus, including the shares
underlying the warrants which will be issued by Teamstaff upon the exercise by
the holders of the warrants, may be offered and sold from time to time by the
selling security holders, and pledgees, donees, transferees or other successors
in interest selling shares received after the date of this prospectus from the
selling security holders as a pledge, gift or other non-sale related transfer,
including in one or more of the following transactions:
- on the over the counter market;
- in transactions other than on the over the counter market such as
private resales;
- in connection with short sales;
- by pledge to secure debts and other obligations;
- in connection with the writing of options, in hedge transactions,
and in settlement of other transactions in standardized or
over-the-counter options;
- in a combination of any of the above transactions; or
- pursuant to Rule 144 under the Securities Act, assuming the
availability of an examination from registration.
The selling security holders may sell their shares at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
at negotiated prices, or at fixed prices.
Broker-dealers that are used to sell shares will either receive discounts
or commissions from the selling shareholders, or will receive commissions from
the purchasers for whom they acted as agents.
The selling security holders and intermediaries through whom shares are
sold may be deemed underwriters within the meaning of the Securities Act with
respect to the shares offered.
There can be no assurance that the selling security holders will sell all
or any of the common stock.
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<PAGE> 24
We have agreed to keep this prospectus effective for a period expiring on
the earlier of the date on which all of the selling security holders' shares
have been sold or the date on which all such shares are eligible for sale
pursuant to Rule 144 under the Securities Act.
The selling shareholders and us have agreed to customary indemnification
obligations with respect to the sale of common stock by use of this prospectus.
REPORTS TO SHAREHOLDERS
Our company distributes annual reports to its stockholders, including
financial statements examined and reported on by independent public accountants,
and will provide such other reports as management may deem necessary or
appropriate to keep stockholders informed of our company's operations.
LEGAL MATTERS
The legality of the offering of the shares will be passed upon for us by
Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York l00l7.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
Our company has filed a Registration Statement under the Act with the
Securities and Exchange Commission, with respect to the securities offered by
this prospectus. This prospectus does not contain all of the information set
forth in the registration statement. For further information with respect to our
company and such securities, reference is made to the registration statement and
to the exhibits and schedules filed therewith. Each statement made in this
prospectus referring to a document filed as an exhibit to the registration
statement is qualified by reference to the exhibit for a complete statement of
its terms and conditions. The registration statement, including exhibits
thereto, may be inspected without charge to anyone at the office of the
Commission, and copies of all or any part thereof may be obtained from the
Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
19
<PAGE> 25
FORWARD LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "1995 Reform Act"). TeamStaff, Inc. desires to avail itself of
certain "safe harbor" provisions of the 1995 Reform Act and is therefore
including this special note to enable the Company to do so. Forward-looking
statements included in this report involve known and unknown risks,
uncertainties, and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) achievements expressed or implied
by such forward-looking statements. Such future results are based upon
management's best estimates based upon current conditions and the most recent
results of operations. These risks include, but are not limited to, risks
associated with the Company's risks of current as well as future acquisitions,
risks from potential workers compensation claims and required payments, risks
associated with payroll and employee related taxes which may require
unanticipated payments by the Company, liabilities associated with the company's
status under certain federal and state employment laws as a co-employer, effects
of competition and technological changes and dependence upon key personnel.
20
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the
securities being registered herein are estimated.
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Securities and Exchange Commission
Registration Fee..........................................................................................$2,634.51
Printing and Engraving Expenses............................................................................ $5,000*
Accounting Fees and Expenses............................................................................... $12,500*
Legal Fees and Expenses.................................................................................... $35,000*
Blue Sky Fees and Expenses................................................................................ $2,000*
Transfer Agent and Registrar Fees.......................................................................... $2,000*
Miscellaneous Fees and Expenses..............................................................................$1,500*
Total................................................................$60,634.51*
===========
</TABLE>
* Estimated.
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our company's By-Laws require us to indemnify, to the full extent
authorized by Section 14A:3-5 of the New Jersey Business Corporation Act, any
person with respect to any civil, criminal, administrative or investigative
action or proceeding instituted or threatened by reason of the fact that he, his
testator or intestate is or was a director, officer or employee of our company
or any predecessor of our company is or was serving at the request of our
company or a predecessor of our company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise.
Section 14A:3-5 of the New Jersey Business Corporation Act authorized the
indemnification of directors and officers against liability incurred by reason
of being a director or officer and against expenses (including attorneys fees)
in connection with defending any action seeking to establish such liability, in
the case of third-party claims, if the officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and if such officer or director shall not have been
adjudged liable for negligence
21
<PAGE> 27
or misconduct, unless a court otherwise determines. Indemnification is also
authorized with respect to any criminal action or proceeding where the officer
or director had no reasonable cause to believe his conduct was unlawful.
In accordance with Section 14A:2-7 of the New Jersey Business Corporation
Act, our company's Certificate of Incorporation eliminates the personal
liability of officers and directors to our company and to stockholders for
monetary damage for violation of a director's duty owed to our company or our
shareholders, under certain circumstances.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or persons controlling our
company pursuant to the foregoing provisions, our company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
ITEM 16. EXHIBITS
The exhibits designated with an asterisk (*) were filed with the initial
submission of this registration statement on form S-3 (File No. 333-38356),
filed with the Commission on June 1, 2000. The exhibits designated with (**) are
filed herewith. All other exhibits have been previously filed with the
Commission and, pursuant to 17 C.F.R. Secs. 20l.24 and 240.12b-32, are
incorporated by reference to the document referenced in brackets following the
descriptions of such exhibits.
EXHIBIT NO. DESCRIPTION
---------- -----------
2.1 -- Plan and Agreement of Merger and
Reorganization dated as of October 29, 1998
among the Company, the Merger
Corporations, the TeamStaff Entities and
certain individuals and trusts as
shareholders of the TeamStaff Entities
(filed as Exhibit A to Proxy Statement of
Digital Solutions, Inc, dated November 12,
1998).
2.2 - Form of Asset Purchase Agreement dated as
of April 7, 2000 by and between TeamStaff
Inc., Teamstaf V, Inc., Outsource
International, Inc. and Synadyne I, Inc.,
Synadyne II, Inc., Synadyne III, Inc.,
Synadyne IV, Inc., Synadyne V, Inc.,
Guardian Employer East LLC and Guardian
Employer West LLC . (Filed as Exhibit 3.1
to Form 8-K dated April 19, 2000).
3.1 -- Amended and Restated Certificate of
Incorporation of Registrant (Filed as
Exhibit A to Definitive Proxy Material
dated July 20, 1990).
3.1.1 -- Form of Amendment to Amended and Restated
Certificate of Incorporation (filed as
Exhibit G to our company's Proxy Statement
dated November 12, 1998 as filed with the
Securities and Exchange Commission).
3.1.2 -- Amended and Restated Certificate of Incorporation
(filed as Exhibit A to our Definitive Proxy
Statement dated May 1, 2000 as filed with the
Securities and Exchange Commission).
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<PAGE> 28
3.2 -- By-Laws of Registrant (Exhibit 10.1 to Form 8-K
dated March 2l, 1990)
4.1* - Form of Warrant issued to Raymond James &
Associates, Inc.
4.2* - Form of Warrant issued to Donald & Co. Securities,
Inc.
4.2.1* - Form of Warrant issued to Donald & Co. Securities,
Inc.
4.3* - Form of Warrant issued to SR Capital Partners, LLC.
5.1** - Opinion of Goldstein & DiGioia, LLP re: Legality of
Shares
10.2 -- Employment Agreement with Donald Kappauf (Exhibit 3
to Form 8-K dated May 17, 1990).
10.4 -- Agreement between Registrant and First
Fidelity Bank, N.A. (Exhibit 10.4 to Form
10-K for fiscal year ended September 30,
1991).
10.5 -- Agreement between Registrant and
Midatlantic Banks, Inc. dated October 11,
1991 (Exhibit 10.5 to Form 10-K for fiscal
year ended September 30, 1991).
10.6 --
Lease dated 10/15/91 for office space at
4041 Hadley Road, South Plainfield, New
Jersey (Exhibit 10.6 to Form 10-K for
fiscal year ended September 30, 1991).
10.7 -- Employment Agreement between Karl Dieckmann
and our company dated November 1, 1991
(Exhibit 10.7 to Form 10-K for fiscal year
ended September 30, 1991).
10.6.1 -- Lease dated May 30, 1997 for office space
at 300 Atrium, Somerset, New Jersey
(Exhibit 10.6.1 to Form 10-K for the fiscal
year ended September 30, 1997).
10.15.1 -- Employment agreement between George J. Eklund and
our company dated March 12, 1996 (Exhibit
10.15.1 to Form 10-K for the fiscal year
ended September 30, 1997).
10.15.2 -- Amended employment agreement between George
J. Eklund and our company dated December
16, 1997 (Exhibit 10.15.2 to Form 10-K for
the fiscal year ended September 30, 1997).
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<PAGE> 29
10.16.1 -- Seventh Amended Loan Agreement between
Registrant and Summit Bank and sixth
amended Promissory Note (Exhibit 10.16.1
to Form 10-K for the fiscal year ended
September 30, 1997).
10.17 -- Loan and Security Agreement dated April 28,
1998 among Digital Solutions, Inc. and
FINOVA Capital Corporation (Filed as
Exhibit 10.17 to Form 10-K filed January
12, 1999).
10.18 -- Secured Promissory Note in the principal
amount of $2,500,000 dated April 28, 1998
in favor of FINOVA Capital Corporation
(Filed as Exhibit 10.18 to Form 10-K filed
January 12, 1999).
10.19 -- Stock Pledge Agreement (Security Agreement)
dated April 28, 1998 between FINOVA Capital
Corporation and Digital Solutions, Inc.
(Filed as Exhibit 10.19 to Form 10-K filed
January 12, 1999).
10.20 -- Employment Agreement between our company
and Kirk Scoggins dated January 25, 1999
(Filed as Exhibit 10.1 to Form 8-K dated
January 25, 1999).
10.21 -- Registration Rights Agreement between our
company and certain former shareholders of
the TeamStaff Companies dated as of January
25, 1999 (Filed as Exhibit 10.2 to Form 8-K
dated January 25, 1999).
10.22 -- Amended and Restated Loan and Security
Agreement between our company and Finova
Capital Corporation dated January 25, 1999
(Filed as Exhibit 10.3 to Form 8-K dated
January 25, 1999).
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<PAGE> 30
10.23 -- Amended and Restated Note in the principal
amount of $2,166,664 dated January 25, 1999
(Filed as Exhibit 10.4 to Form 8-K dated
January 25, 1999).
10.24 -- Secured Note in the amount of $2,500,000 in
favor of Finova Capital Corporation dated
January 25, 1999 (Filed as Exhibit 10.5 to
Form 8-K dated January 25, 1999).
10.25 -- Secured Note in the amount of $750,000 in
favor of Finova Capital Corporation dated
January 25, 1999 (Filed as Exhibit 10.6 to
Form 8-K dated January 25, 1999).
10.26 -- Schedule to Amended and Restated Loan
Agreement dated January 25, 1999 with
Finova Capital Corporation (Filed as
Exhibit 10.7 to Form 8-K dated January 25,
1999).
10.27* - Form of Agreement between Teamstaff and
Donald & Co. Securities, Inc.
10.28 First Amendment to the Amended and Restated
Schedule to the Amended and Restated Loan
and Security Agreement among TeamStaff,
Inc. and its Subsidiaries as Co-Borrowers
and FINOVA Capital Corporation dated April
7, 2000 (Filed as Exhibit 10.1 to Form 8-K
dated April 19, 2000).
10.29 Second Amended and Restated Secured
Promissory Note A dated April 7, 2000 in
the principal amount of $1,541,659 payable
to FINOVA Capital Corporation (Filed as
Exhibit 10.2 to Form 8-K dated April 19,
2000).
10.30 Amended and Restated Secured Promissory
Note B dated April 7, 2000 in the principal
amount of $1,899,996 payable to FINOVA
Capital Corporation (Filed as Exhibit 10.3
to Form 8-K dated April 19, 2000).
10.31 Secured Promissory Note C dated April 7,
2000 in the principal amount of $4,000,000
payable to FINOVA Capital Corporation
(Filed as Exhibit 10.4 to Form 8-K dated
April 19, 2000).
10.32* Employment Agreement dated October 1, 1999
between our company and Donald Kappauf.
10.33* Employment Agreement dated October 1, 1999
between our company and Donald Kelly.
21 -- Subsidiaries of Registrant (Filed as Exhibit 21
to Form 10-K dated January 11, 2000).
25
<PAGE> 31
23.1 ** -- Consent of Arthur Andersen LLP.
23.2 ** - Consent of Goldstein & DiGioia, LLP, contained
in exhibit 5.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
A. (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereto) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that paragraphs (a)(1)(i) - (a)(1)(iii)
do not apply if the information required to be included in a
post-effective amendment by such clauses is contained in periodic
reports filed with and furnished to the Commission by the Company
pursuant to Section 13 or Section 15(d) of the Exchange Act of
1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) For purposes of determining any liability under the
Securities Act of 1933, each filing of our company's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the
26
<PAGE> 32
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
B. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant
in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
27
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Somerset, State of New Jersey, on the 21st day of
June, 2000.
TEAMSTAFF, INC.
By: /s/Donald W. Kappauf
------------------------
Donald W. Kappauf
President, Chief Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below substitutes and appoints Donald W. Kappauf or Donald Kelly as his true and
lawful attorney-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be don in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/Donald W. Kappauf President, Chief Executive May 23, 2000
----------------------- Officer and Director
Donald W. Kappauf
/s/Karl W. Dieckmann Chairman of the Board May 23, 2000
-----------------------
Karl W. Dieckmann
/s/Charles R. Dees Director May 23, 2000
-----------------------
Charles R. Dees
/s/Martin J. Delaney Director May 23, 2000
-----------------------
Martin J. Delaney
</TABLE>
28
<PAGE> 34
<TABLE>
<S> <C> <C>
/s/John H. Ewing Director May 23, 2000
-----------------------
John H. Ewing
/s/William J. Marino Director May 23, 2000
-----------------------
William J. Marino
/s/ Rocco Marano Director May 23, 2000
-----------------------
Rocco Marano
/s/Kirk A. Scoggins Director May 23, 2000
-----------------------
Kirk A. Scoggins
/s/Donald T. Kelly Chief Financial Officer and May 23, 2000
----------------------- Principal Accounting Officer
Donald T. Kelly
</TABLE>
29
<PAGE> 35
EXHIBIT 4.1
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
INVESTMENT BANKING AGREEMENT OF EVEN DATE (THE "AGREEMENT").
THE TRANSFERABILITY OF THIS WARRANT IS
RESTRICTED AS PROVIDED IN SECTION 2
No. W- February 23, 1998
DIGITAL SOLUTIONS, INC.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, the receipt of which is hereby
acknowledged by Digital Solutions, Inc., a New Jersey corporation (the
"Company"), Raymond James & Associates, Inc. is hereby granted the right to
purchase, at any time from the date hereof until 5:00 P.M., New York City time,
on February 5, 2003 (the "Warrant Exercise Term"), up to 25,000 paid and
non-assessable shares (the "Warrant Shares") of the Company's Common Stock,
$.001 par value per share ("Common Stock").
This Warrant is exercisable at a per share price of $2.0563 (the
"Exercise Price") payable in cash or by certified or official bank check in New
York Clearing House funds, subject to adjustment as provided in Section l
hereof. Upon surrender of this Warrant with the annexed Subscription Form duly
executed, together with payment of the Exercise Price for the shares of Common
Stock purchased at the Company's principal executive offices (presently located
at 300 Atrium Drive, Somerset, New Jersey 008873) the registered holder of the
Warrant ("holder") shall be entitled to receive a certificate or certificates
for the shares of Common
<PAGE> 36
Stock so purchased.
1. Exercise of Warrant.
1.1 (a) The purchase rights represented by this Warrant are
exercisable at the option of the holder hereof, in whole or in part (but not as
to fractional shares of the Common Stock) during any period in which this
Warrant may be exercised as set forth above. In the case of the purchase of
less than all the shares of Common Stock purchasable under this Warrant, the
Company shall cancel this Warrant upon the surrender thereof and shall execute
and deliver a new Warrant of like tenor for the balance of the shares of Common
Stock purchasable hereunder.
1.1 (b) Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange the Warrants represented by such
Holder's Warrant Certificate, in whole or in part (a "Warrant Exchange"), into
the number of fully paid and non-assessable Warrant Shares determined in
accordance with this Section 1.1 (b), by surrendering such Warrant Certificate
at the principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating such Holder's intent to effect such exchange,
the number of Warrants (the "Total Share Number") to be exchanged and the date
on which the Holder requests that such Warrant Exchange occur (the "Notice of
Exchange"). The Warrant Exchange shall take place on the date specified in the
Notice of Exchange, or, if later, the date the Notice of Exchange is received
by the Company (the "Exchange Date"). Effective upon the Exchange Date, the
Warrant Certificate shall be deemed to represent the right to receive, and
shall be exchanged for (I) the number of Warrant Shares (rounded to the nearest
integer) equal to (A) the Total Share Number less (B) the number of Warrant
Shares equal to the quotient obtained by dividing (i) the product of the Total
Share Number and the then current Exercise Price per Warrant Share by (ii) the
current Market Price (as hereafter defined) of a share of Common Stock; and
(II) if applicable, a new Warrant Certificate of like tenor evidencing the
balance of the Warrant Shares remaining subject to the Holder's Warrant.
Certificates for the Warrant Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant Certificate of like tenor evidencing the balance of
the Warrant Shares remaining subject to the Holder's Warrant Certificate (the
"New Warrant Certificate"), shall be issued as of the Exchange Date and
2
<PAGE> 37
delivered to the Holder within five (5) business days following the Exchange
Date.
As used herein, the phrase "Market Price" at any date shall be deemed
to be the last reported sale price for the date preceding the Exchange Date,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the preceding three trading days, in either case
as officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading or as reported in the Nasdaq National
Market System, or, if the Common Stock is not listed or admitted to trading on
any national securities exchange or quoted on the Nasdaq National Market
System, the last reported sale price as furnished by the National Association
of Securities Dealers, Inc. through Nasdaq or similar organization if Nasdaq is
no longer reporting such information, or if the Common Stock is not quoted on
Nasdaq, as determined in good faith by resolution of the Board of Directors of
the Company, based on the best information available to it.
1.2 The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the holder hereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in the name of, or in
such names as may be directed by, the holder hereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of such
certificate in a name other than that of the holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
1.3 In case at any time or from time to time the Company shall
subdivide as a whole, split or combine (reverse split) its Common Stock or
issue a dividend payable in shares, this Warrant shall be adjusted so that
immediately thereafter the holder shall be entitled to receive upon exercise
the number of shares of Common Stock or other securities which the holder would
have owned or been entitled to receive after the happening of any such event if
the holder had exercised this Warrant immediately prior to the
3
<PAGE> 38
happening of such event (or the record date thereof, if there shall be one),
and the Warrant Exercise Price then in effect shall be correspondingly adjusted
so that the aggregate price payable upon the exercise of the Warrant shall be
the same as it was immediately prior to the adjustment.
1.4 In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of this Warrant (other than change in
par value, or from par value to no par value, or from no par value to par
value, or as a result or a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger in which the Company is the continuing corporation and which does
not result in any reclassification or change of outstanding shares of Common
Stock, other than a change in number of the shares issuable upon exercise of
the Warrant) or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
holder of this Warrant shall have the right thereafter to exercise this Warrant
into the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock of the Company
for which the Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance, and the
Exercise Price per share shall be correspondingly adjusted so that the
aggregate price payable upon the exercise of the Warrant shall be the same as
it was immediately prior to the adjustment. The above provisions of this
Section l.4 shall similarly apply to successive reclassifications and changes
of shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
1.5 The Company shall not be required to issue fractional shares of
Common Stock upon exercise of the Warrant but shall pay for any such fraction
of a share an amount in cash equal to the then Current Market Price Per Share
of one share of common Stock multiplied by such fraction.
1.6 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall
4
<PAGE> 39
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be so issuable shall be duly and validly
issued and fully-paid and non-assessable.
2. Restrictions on Transfer.
(a) The holder acknowledges that he has been advised by the Company
that this Warrant and the Warrant Shares (collectively the "Securities") have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), that the Warrant is being issued, and the shares issuable
upon exercise of the Warrant will be issued, on the basis of the statutory
exemption provided by section 4(2) of the Securities Act relating to
transactions by an issuer not involving any public offering, and that the
Company's reliance upon this statutory exemption is based in part upon the
representations made by the holder contained herein. The holder acknowledges
that he has been informed by the Company of, or is otherwise familiar with, the
nature of the limitations imposed by the Securities Act and the rules and
regulations thereunder on the transfer of securities. In particular, the holder
agrees that no sale, assignment or transfer of the Securities shall be valid or
effective, and the Company shall not be required to give any effect to any such
sale, assignment or transfer, unless (i) the sale, assignment or transfer of
the Securities is registered under the Securities Act, and the Company has no
obligations or intention to so register the Securities, or (ii) the Securities
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Securities Act or such sale, assignment, or
transfer is otherwise exempt from registration under the Securities Act. The
holder represents and warrants that he has acquired this Warrant and will
acquire the Securities for his own account for investment and not with a view
to the sale or distribution thereof or the granting of any participation
therein, and that he has no present intention of distributing or selling to
others any of such interest or granting any participation therein. The holder
acknowledges that the securities shall bear the following legend:
"These securities have not been registered under the Securities Act
of 1933. Such securities may not be sold or offered for sale,
transferred, hypothecated or otherwise
5
<PAGE> 40
assigned except pursuant to an effective registration statement with
respect thereto under such Act or an opinion of counsel to the
Company that an exemption from registration for such sale, offer,
transfer, hypothecation or other assignment is available under such
Act."
3. Registration Rights.
3.1 The Company shall advise the Holder of this Warrant or of the
Warrant Shares or any then holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "holders") by written notice at least
four weeks prior to the filing of any registration statement under the
Securities Act of 1933 (the "Act") covering securities of the Company, except
on Forms S-4 or S-8, and upon the request of any such holder within ten days
after the receipt of such notice, include in any such registration statement
all of the Warrant Shares issuable to any holder requesting the inclusion of
its Warrant Shares in such registration and such information as may be required
to permit a public offering of the Warrant Shares. The Company shall supply
prospectuses and other documents as the Holder may request in order to
facilitate the public sale or other disposition of the Warrant Shares, qualify
the Warrant Shares for sale in such states as any such holder designates and do
any and all other acts and things which may be necessary or desirable to enable
such Holders to consummate the public sale or other disposition of the Warrant
Shares, and furnish indemnification in the manner as set forth in Subsection
3.2 of this Section 3. Such holders shall furnish information and
indemnification as set forth in Subsection 3.2 of this Section 3. For the
purpose of the foregoing, inclusion of the Warrant Shares in a Registration
Statement pursuant to this sub-paragraph 3.l under a condition that the offer
and/or sale of such Warrant Shares not commence until a date not to exceed 90
days from the effective date of such registration statement, if so requested by
the underwriters of a firm commitment public offering, shall be deemed to be in
compliance with this sub-paragraph 3.l. If the registration statement is for a
shelf registration, the Company shall keep such registration statement
effective until the earlier of (i) the date all the Warrant Shares shall have
been sold, or (ii) the date which is 90 days after the commencement of such
sales shall be permitted under such registration statement.
6
<PAGE> 41
3.2 The following provisions of this Section 3 shall also be
applicable to the exercise of the registration rights granted under this
Section 3.l:
(A) The foregoing registration rights shall be contingent on the
holders furnishing the Company with such appropriate information (relating to
the intentions of such holders) as the Company shall reasonably request in
writing. Following the effective date of such registration, the Company shall
upon the request of any owner of Warrants and/or Warrant Shares forthwith
supply such number of prospectuses meeting the requirements of the Act as shall
be requested by such owner to permit such holder to make a public offering of
all Warrant Shares from time to time offered or sold to such holder, provided
that such holder shall from time to time furnish the Company with such
appropriate information (relating to the intentions of such holder) as the
Company shall request in writing. The Company shall also use its best efforts
to qualify the Warrant Shares for sale in such states as such holder shall
reasonably designate.
(B) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Subsection 3.l of this Section
3 notwithstanding that Warrant Shares subject to this Warrant may be included
in any such registration. Any holder whose Warrant Shares are included in any
such registration statement pursuant to this Section 3 shall, however, bear the
fees of his own counsel and any registration fees, transfer taxes or
underwriting discounts or commissions applicable to the Warrant Shares sold by
him pursuant thereto.
(C) The Company shall indemnify and hold harmless each such holder
and each underwriter, within the meaning of the Act, who may purchase from or
sell for any such holder any Warrant Shares from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Section 3 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages or liabilities are caused by any such
7
<PAGE> 42
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished or required to be furnished as set forth in
the Company's written request in writing to the Company by such holder or
underwriter expressly for use therein, which indemnification shall include each
person, if any, who controls any such holder or any such underwriter within the
meaning of such Act; provided, however, that the Company shall not be obliged
so to indemnify any such holder or underwriter or controlling person unless
such holder or underwriter shall at the same time agree to indemnify the
Company, its directors, each officer signing the related registration statement
and each person, if any, who controls the Company within the meaning of such
Act, from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus required to be filed
or furnished by reason of this Section 3 or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each such case, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or alleged
untrue statement or omission which shall be based upon information furnished in
writing to the Company by any such holder or underwriter expressly for use
therein.
(D) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this subsection 3.2
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company or the applicable
sellers, as the case may be, shall contribute to the aggregate losses, claims,
damages and liabilities incurred (including legal or other expenses reasonably
incurred in connection with the investigation or defending of same) by the
other and for which such indemnification was sought. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the offering of
the securities included in the registration statement (taking into account the
portion of the proceeds of the offering realized by each), the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations appropriate in
the circumstances; provided, however, that (i) in no case shall any
8
<PAGE> 43
seller of Warrant Shares be required to contribute any amount in excess of the
total public offering price of the Warrant Shares sold by such seller and (ii)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this subsection
3.2, each person who controls any seller of Warrant Shares or the Company shall
have the same rights to contribution as such seller of the Company.
4. Miscellaneous.
4.1 All the covenants and agreements made by the Company in this
Warrant shall bind its successors and assigns.
4.2 No recourse shall be had for the payment of the principal of or
the interest of premium, if any, on this Warrant or for any claim based hereon
or otherwise in any manner in respect hereof, against any incorporator,
stockholder, officer or director, past, present or future, of the Company or of
any predecessor corporation, whether by virtue of any constitutional provision
or statute or rule of law, or by the enforcement of any assessment or penalty
or in any other manner, all such liability being expressly waived and released
by the acceptance hereof and as part of the consideration for the issue hereof.
4.3 No course of dealing between the Company and the holder hereof
shall operate as a waiver of any right of any holder hereof, and no delay on
the part of the holder in exercising any right hereunder shall so operate.
4.4 This Warrant may be amended only by a written instrument executed
by the Company and the holder hereof. Any amendment shall be endorsed upon this
Warrant, and all future holders shall be bound thereby.
4.5 All communications provided for herein shall be sent, except as
may be otherwise specifically provided, by registered or certified mail: if to
the holder of this Warrant, to the address shown on the books of the Company;
and if to the Company, to 300 Atrium Drive, Somerset, New Jersey 08873,
attention of the President, or to such other address as the Company may advise
the holder of this Warrant in writing. Notices shall be
9
<PAGE> 44
deemed given when mailed.
4.6 The provisions of this Warrant shall in all respects be
constructed according to, and the rights and liabilities of the parties hereto
shall in all respects be governed by, the laws of the State of New Jersey. This
Warrant shall be deemed a contract made under the laws of the State of New
Jersey and the validity of this Warrant and all rights and liabilities
hereunder shall be determined under the laws of said State.
4.7 The headings of the Sections of this Warrant are inserted for
convenience only and shall not be deemed to constitute a part of this Warrant.
IN WITNESS WHEREOF, DIGITAL SOLUTIONS, INC. has caused this Warrant
to be executed in its corporate name by its President, and its seal to be
affixed hereto.
Dated: February 23, 1998
DIGITAL SOLUTIONS, INC.
[SEAL] By:
--------------------------------
Donald W. Kappauf
President
Attest:
-------------------------------
Secretary
SUBSCRIPTION FORM
TO: Digital Solutions, Inc.
300 Atrium Drive
Somerset, New Jersey 08873
The undersigned holder hereby irrevocably elects to exercise the right
to purchase shares of Common Stock covered by this Warrant
according to the conditions hereof and
10
<PAGE> 45
herewith makes full payment of the Exercise Price of such shares.
Kindly deliver to the undersigned a certificate representing the Shares.
INSTRUCTIONS FOR DELIVERY
Name:
------------------------------------------------------------
(please typewrite or print in block letters)
Address:
------------------------------------------------------------
Dated:
--------------------
Signature
----------------------------------
11
<PAGE> 46
EXHIBIT 4.2
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
SUBSCRIPTION AGREEMENT OF EVEN DATE (THE "SUBSCRIPTION AGREEMENT").
THE TRANSFERABILITY OF THIS WARRANT IS
RESTRICTED AS PROVIDED IN SECTION 2
No. W-136 November 29, 1999
TEAMSTAFF, INC.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, the receipt of which is hereby
acknowledged by TeamStaff, Inc., a New Jersey corporation (the "Company"),
Donald & Co Securities is hereby granted the right to purchase, at any time
from the date hereof until 5:00P.M., New York City time, on November 29,2002
up to 50,000 (fifty thousand) paid and non-assessable shares of the Company's
Common Stock, $.001 par value per share ("Common Stock").
This Warrant is exercisable at a per share price of $1.186 (the
"Exercise Price") payable in cash or by certified or official bank check in New
York Clearing House funds subject to adjustment as provided in Section 1
hereof. Upon surrender of this Warrant with the annexed Subscription Form duly
executed, together with payment of the Exercise Price for the shares of Common
Stock purchased at the Company's principal executive offices (presently located
at 300 Atrium Drive, Somerset, New Jersey 08873) the registered holder of the
Warrant ("holder") shall be entitled to receive a certificate or certificates
for the shares of Common Stock so purchased.
1. Exercise of Warrant.
1.1. The purchase rights represented by this Warrant are exercisable
at the option of the holder hereof, in whole or in part (but not as to
fractional shares of the Common Stock) during any period in which this Warrant
may be exercised as set forth above. In the case of the purchase of less than
all the shares of Common Stock purchasable under this Warrant, the Company shall
cancel this Warrant upon the surrender thereof and shall execute and deliver a
new Warrant of like tenor for the balance of the shares of Common Stock
purchasable hereunder.
<PAGE> 47
1.2 The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the holder hereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in the name of, or in
such names as may be directed by, the holder hereof, provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of such certificate in a name
other than that of the holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
1.3 In case at any time or from time to time the Company shall
subdivide as a whole, split its Common Stock or issue a dividend payable in
shares or otherwise, the number of shares of Common Stock then outstanding into
a greater or lesser number of shares, the Warrant Price then in effect shall be
increased or reduced proportionately, and the number of shares issuable upon
exercise of this Warrant shall accordingly be increased proportionately.
1.4 In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of this Warrant (other than change in par
value, or from par value to no par value, or from no par value to par value, or
as a result or a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger in
which the Company is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock, other than a
change in number of the shares issuable upon exercise of the Warrant) or in case
of any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, the holder of this Warrant shall
have the right thereafter to exercise this Warrant into the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock of the Company for which the Warrant
might have been exercised immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. The above provisions of this Section
1.4 shall similarly apply to successive reclassifications and changes of shares
of Common Stock and to successive consolidations, mergers, sales or conveyances.
1.5 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant. The
Company covenants that all shares of Common Stock which shall be so issuable
shall be duly and validly issued and fully-paid and non-assessable.
2. Restrictions on Transfer.
The holder acknowledges that he has been advised by the Company that
this Warrant and the shares of Common Stock (the "Warrant Shares") issuable upon
exercise thereof (collectively the "Securities") have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), that the Warrant
is being issued, and the shares issuable upon
<PAGE> 48
exercise of the Warrant will be issued, on the basis of the statutory exemption
provided by section 4(2) of the Securities Act relating to transactions by an
issuer not involving any public offering, and that the Company's reliance upon
this statutory exemption is based in part upon the representations made by the
holder contained herein. The holder acknowledges that he has been informed by
the Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Securities Act and the rules and regulations thereunder on the
transfer of securities. In particular, the holder agrees that no sale,
assignment or transfer of the Securities shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment
or transfer, unless (i) the sale, assignment or transfer of the Securities is
registered under the Securities Act, and the Company has no obligations or
intention to so register the Securities, or (ii) the Securities are sold,
assigned or transferred in accordance with all the requirements and limitations
of Rule 144 under the Securities Act or such sale, assignment, or transfer is
otherwise exempt from registration under the Securities Act. The holder
represents and warrants that he has acquired this Warrant and will acquire the
securities for his own account for investment and not with a view to the sale
or distribution thereof or the granting of any participation therein, and that
he has no present intention of distributing or selling to others any of such
interest or granting any participation therein. The holder acknowledges that
the securities shall bear the following legend:
"These securities have not been registered under the Securities Act
of 1933. Such securities may not be sold or offered for sale,
transferred, hypothecated or otherwise assigned in the absence of an
effective registration statement with respect thereto under such Act
or an opinion of counsel to the Company that an exemption from
registration for such sale, offer, transfer, hypothecation or other
assignment is available under such Act."
3. Registration Rights.
3.1 The Company shall advise the Holder of this Warrant or of the
Warrant Shares or any then holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "holders") by written notice at least
four weeks prior to the filing of any registration statement under the
Securities Act of 1933 (the "Act") covering securities of the Company, except on
Forms S-4 or S-8, and upon the request of any such holder within ten days after
the date of such invoice, include in any such registration statement such
information as may be required to permit a public offering of the Warrant
Shares. The Company shall supply prospectuses and other documents as the Holder
may request in order to facilitate the public sale or other disposition of the
Warrant Shares, qualify the Warrant Shares for sale in such states as any such
holder designates and do any and all other acts and things which may be
necessary or desirable to enable such Holders to consummate the public sale or
other disposition of the Warrant Shares, and furnish indemnification in the
manner as set forth in Subsection 3.2 of this Section 3. Such holders shall
furnish information and indemnification as set forth in Subsection 3.2 of this
Section 3. For the purpose of the foregoing, inclusion of the Warrant Shares in
a Registration Statement pursuant to this sub-paragraph 3.1 under a condition
that the offer and/or sale of such Warrant Shares not commence until a date not
to exceed 90 days from the effective date of such registration statement shall
be deemed to be in compliance with this sub-paragraph 3.1.
<PAGE> 49
3.2 The following provisions of this Section 3 shall also be
applicable to the exercise of the registration rights granted under this Section
3.1:
(A) The foregoing registration rights shall be contingent on the
holders furnishing the Company with such appropriate information (relating to
the intentions of such holders) as the Company shall reasonably request in
writing. Following the effective date of such registration, the Company shall
upon the request of any owner of Warrants and/or Warrant Shares forthwith supply
such number of prospectuses meeting the requirements of the Act as shall be
requested by such owner to permit such holder to make a public offering of all
Warrant Shares from time to time offered or sold to such holder, provided that
such holder shall from time to time furnish the Company with such appropriate
information (relating to the intentions of such holder) as the Company shall
request in writing. The Company shall also use its best efforts to qualify the
Warrant Shares for sale in such states as such holder shall reasonably
designate.
(B) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Subsection 3.1 of this Section
3 notwithstanding that Warrant Shares subject to this Warrant may be included in
any such registration. Any holder whose Warrant Shares are included in any such
registration statement pursuant to this Section 3 shall, however, bear the fees
of his own counsel and any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant Shares sold by him pursuant
thereto.
(C) The Company shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the Act, who may purchase
from or sell for any such holder any Warrant Shares from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Section 3 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to the Company by
such holder or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such underwriter within the
meaning of such Act; provided, however, that the Company shall not be obliged so
to indemnify any such holder or underwriter or controlling person unless such
holder or underwriter shall at the same time agree to indemnify the Company, its
directors, each officer signing the related registration statement and each
person, if any, who controls the Company within the meaning of such Act, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or furnished by
reason of this Section 3 or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or alleged untrue statement or
<PAGE> 50
omission based upon information furnished in writing to the Company by any such
holder or underwriter expressly for use therein.
4. Miscellaneous.
4.1 All the covenants and agreements made by the Company in this
Warrant shall bind its successors and assigns.
4.2 No recourse shall be had for the payment of the principal of or
the interest of premium, if any, on this Warrant or for any claim based hereon
or otherwise in any manner in respect hereof, against any incorporator,
stockholder, officer or director, past, present or future, of the Company or of
any predecessor corporation, whether by virtue of any constitutional provision
or statute or rule of law, or by the enforcement of any assessment or penalty or
in any other manner, all such liability being expressly waived and released by
the acceptance hereof and as part of the consideration for the issue hereof.
4.3 No course of dealing between the Company and the holder hereof
shall operate as a waiver of any right of any holder hereof, and no delay on the
part of the holder in exercising any right hereunder shall so operate.
4.4 This Warrant may be amended only by a written instrument
executed by the Company and the holder hereof. Any amendment shall be endorsed
upon this Warrant, and all future holders shall be bound thereby.
4.5 All communications provided for herein shall be sent, except as
may be otherwise specifically provided, by registered or certified mail: if to
the holder of this Warrant, to the address shown on the books of the Company;
and if to the Company, to 300 Atrium Drive, Somerset, New Jersey 08873,
attention of the President, or to such other address as the Company may advise
the holder of this Warrant in writing. Notices shall be deemed given when
mailed.
4.6 The provisions of this Warrant shall in all respects be
constructed according to, and the rights and liabilities of the parties hereto
shall in all respects be governed by, the laws of the State of New Jersey. This
Warrant shall be deemed a contract made under the laws of the State of New
Jersey and the validity of this Warrant and all rights and liabilities hereunder
shall be determined under the laws of said State.
<PAGE> 51
4.7 The headings of the Sections of this Warrant are inserted for
convenience only and shall not be deemed to constitute a part of this Warrant.
IN WITNESS WHEREOF, DIGITAL SOLUTIONS, INC. has caused this Warrant to
be executed in its corporate name by its Vice Chairman, and its seal to be
affixed hereto.
Dated:
TEAMSTAFF, INC.
Company Seal
By: /s/ DONALD W. KAPPAUF
---------------------
Donald W. Kappauf
President & CEO
<PAGE> 52
EXHIBIT 4.21
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
SUBSCRIPTION AGREEMENT OF EVEN DATE (THE "SUBSCRIPTION AGREEMENT").
THE TRANSFERABILITY OF THIS WARRANT IS
RESTRICTED AS PROVIDED IN SECTION 2
No. W-135 November 29, 1999
TEAMSTAFF, INC.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, the receipt of which is hereby
acknowledged by TeamStaff, Inc., a New Jersey corporation (the "Company"),
Donald & Co Securities is hereby granted the right to purchase, at any time from
the date hereof until 5:00P.M., New York City time, on November 29, 2002 up to
300,000 (three hundred thousand) paid and non-assessable shares of the Company's
Common Stock, $.001 par value per share ("Common Stock").
This Warrant is exercisable at a per share price of $1.186 (the
"Exercise Price") payable in cash or by certified or official bank check in New
York Clearing House funds subject to adjustment as provided in Section 1 hereof.
Upon surrender of this Warrant with the annexed Subscription Form duly executed,
together with payment of the Exercise Price for the shares of Common Stock
purchased at the Company's principal executive offices (presently located at 300
Atrium Drive, Somerset, New Jersey 08873) the registered holder of the Warrant
("holder") shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased.
1. Exercise of Warrant.
1.1 The purchase rights represented by this Warrant are exercisable
at the option of the holder hereof, in whole or in part (but not as to
fractional shares of the Common Stock) during any period in which this Warrant
may be exercised as set forth above. In the case of the purchase of less than
all the shares of Common Stock purchasable under this Warrant, the Company shall
cancel this Warrant upon the surrender thereof and shall execute and deliver a
new Warrant of like tenor for the balance of the shares of Common Stock
purchasable hereunder.
<PAGE> 53
1.2 The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the holder hereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in the name of, or in
such names as may be directed by, the holder hereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of such certificate in a name
other than that of the holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
1.3 In case at any time or from time to time the Company shall
subdivide as a whole, split its Common Stock or issue a dividend payable in
shares or otherwise, the number of shares of Common Stock then outstanding into
a greater or lesser number of shares, the Warrant Price then in effect shall be
increased or reduced proportionately, and the number of shares issuable upon
exercise of this Warrant shall accordingly be increased proportionately.
1.4 In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of this Warrant (other than change in par
value, or from par value to no par value, or from no par value to par value, or
as a result or a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger in
which the Company is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock, other than a
change in number of the shares issuable upon exercise of the Warrant) or in case
of any sale or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, the holder of this Warrant shall
have the right thereafter to exercise this Warrant into the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock of the Company for which the Warrant
might have been exercised immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. The above provisions of this Section
1.4 shall similarly apply to successive reclassifications and changes of shares
of Common Stock and to successive consolidations, mergers, sales or conveyances.
1.5 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant. The
Company covenants that all shares of Common Stock which shall be so issuable
shall be duly and validly issued and fully-paid and non-assessable.
2. Restrictions on Transfer.
The holder acknowledges that he has been advised by the Company that
this Warrant and the shares of Common Stock (the "Warrant Shares") issuable upon
exercise thereof (collectively the "Securities") have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), that the Warrant
is being issued, and the shares issuable upon
<PAGE> 54
exercise of the Warrant will be issued, on the basis of the statutory exemption
provided by section 4(2) of the Securities Act relating to transactions by an
issuer not involving any public offering, and that the Company's reliance upon
this statutory exemption is based in part upon the representations made by the
holder contained herein. The holder acknowledges that he has been informed by
the Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Securities Act and the rules and regulations thereunder on the
transfer of securities. In particular, the holder agrees that no sale,
assignment or transfer of the Securities shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment or
transfer, unless (i) the sale, assignment or transfer of the Securities is
registered under the Securities Act, and the Company has no obligations or
intention to so register the Securities, or (ii) the Securities are sold,
assigned or transferred in accordance with all the requirements and limitations
of Rule 144 under the Securities Act or such sale, assignment, or transfer is
otherwise exempt from registration under the Securities Act. The holder
represents and warrants that he has acquired this Warrant and will acquire the
securities for his own account for investment and not with a view to the sale or
distribution thereof or the granting of any participation therein, and that he
has no present intention of distributing or selling to others any of such
interest or granting any participation therein. The holder acknowledges that the
securities shall bear the following legend:
"These securities have not been registered under the Securities Act of
1933. Such securities may not be sold or offered for sale,
transferred, hypothecated or otherwise assigned in the absence of an
effective registration statement with respect thereto under such Act
or an opinion of counsel to the Company that an exemption from
registration for such sale, offer, transfer, hypothecation or other
assignment is available under such Act."
3. Registration Rights.
3.1 The Company shall advise the Holder of this Warrant or of the
Warrant Shares or any then holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "holders") by written notice at least
four weeks prior to the filing of any registration statement under the
Securities Act of 1933 (the "Act") covering securities of the Company, except on
Forms S-4 or S-8, and upon the request of any such holder within ten days after
the date of such invoice, include in any such registration statement such
information as may be required to permit a public offering of the Warrant
Shares. The Company shall supply prospectuses and other documents as the Holder
may request in order to facilitate the public sale or other disposition of the
Warrant Shares, qualify the Warrant Shares for sale in such states as any such
holder designates and do any and all other acts and things which may be
necessary or desirable to enable such Holders to consummate the public sale or
other disposition of the Warrant Shares, and furnish indemnification in the
manner as set forth in Subsection 3.2 of this Section 3. Such holders shall
furnish information and indemnification as set forth in Subsection 3.2 of this
Section 3. For the purpose of the foregoing, inclusion of the Warrant Shares in
a Registration Statement pursuant to this sub-paragraph 3.1 under a condition
that the offer and/or sale of such Warrant Shares not commence until a date not
to exceed 90 days from the effective date of such registration statement shall
be deemed to be in compliance with this sub-paragraph 3.1.
<PAGE> 55
3.2 The following provisions of this Section 3 shall also be
applicable to the exercise of the registration rights granted under this Section
3.1:
(A) The foregoing registration rights shall be contingent on
the holders furnishing the Company with such appropriate information (relating
to the intentions of such holders) as the Company shall reasonably request in
writing. Following the effective date of such registration, the Company shall
upon the request of any owner of Warrants and/or Warrant Shares forthwith supply
such number of prospectuses meeting the requirements of the Act as shall be
requested by such owner to permit such holder to make a public offering of all
Warrant Shares from time to time offered or sold to such holder, provided that
such holder shall from time to time furnish the Company with such appropriate
information (relating to the intentions of such holder) as the Company shall
request in writing. The Company shall also use its best efforts to qualify the
Warrant Shares for sale in such states as such holder shall reasonably
designate.
(B) The Company shall bear the entire cost and expense of
any registration of securities initiated by it under Subsection 3.1 of this
Section 3 notwithstanding that Warrant Shares subject to this Warrant may be
included in any such registration. Any holder whose Warrant Shares are included
in any such registration statement pursuant to this Section 3 shall, however,
bear the fees of his own counsel and any registration fees, transfer taxes or
underwriting discounts or commissions applicable to the Warrant Shares sold by
him pursuant thereto.
(C) The Company shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the Act, who may purchase
from or sell for any such holder any Warrant Shares from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Section 3 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to the Company by
such holder or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such underwriter within the
meaning of such Act; provided, however, that the Company shall not be obliged so
to indemnify any such holder or underwriter or controlling person unless such
holder or underwriter shall at the same time agree to indemnify the Company, its
directors, each officer signing the related registration statement and each
person, if any, who controls the Company within the meaning of such Act, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or furnished by
reason of this Section 3 or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or alleged untrue statement or
<PAGE> 56
omission based upon information furnished in writing to the Company by any such
holder or underwriter expressly for use therein.
4. Miscellaneous.
4.1 All the covenants and agreements made by the Company in this
Warrant shall bind its successors and assigns.
4.2 No recourse shall be had for the payment of the principal of
or the interest of premium, if any; on this Warrant or for any claim based
hereon or otherwise in any manner in respect hereof; against any incorporator,
stockholder, officer or director, past, present or future, of the Company or of
any predecessor corporation, whether by virtue of any constitutional provision
or statute or rule of law, or by the enforcement of any assessment or penalty or
in any other manner, all such liability being expressly waived and released by
the acceptance hereof and as part of the consideration for the issue hereof.
4.3 No course of dealing between the Company and the holder hereof
shall operate as a waiver of any right of any holder hereof, and no delay on the
part of the holder in exercising any right hereunder shall so operate.
4.4 This Warrant may be amended only by a written instrument executed
by the Company and the holder hereof. Any amendment shall be endorsed upon this
Warrant, and all future holders shall be bound thereby.
4.5 All communications provided for herein shall be sent, except as
may be otherwise specifically provided, by registered or certified mail: if to
the holder of this Warrant, to the address shown on the books of the Company;
and if to the Company, to 300 Atrium Drive, Somerset, New Jersey 08873,
attention of the President, or to such other address as the Company may advise
the holder of this Warrant in writing. Notices shall be deemed given when
mailed.
4.6 The provisions of this Warrant shall in all respects be
constructed according to, and the rights and liabilities of the parties hereto
shall in all respects be governed by, the laws of the State of New Jersey. This
Warrant shall be deemed a contract made under the laws of the State of New
Jersey and the validity of this Warrant and all rights and liabilities hereunder
shall be determined under the laws of said State.
<PAGE> 57
4.7 The headings of the Sections of this Warrant are inserted for
convenience only and shall not he deemed to constitute a part of this Warrant.
IN WITNESS WHEREOF, DIGITAL SOLUTIONS, INC, has caused this Warrant
to be executed in its corporate name by its Vice Chairman, and its seal to be
affixed hereto.
Dated:
TEAMSTAFF, INC.
Company Seal
By: /s/ DONALD W. KAPPAUF
--------------------------
Donald W. Kappauf
President & CEO
<PAGE> 58
EXHIBIT 4.3
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE TRANSFERABILITY OF THIS WARRANT IS
RESTRICTED AS PROVIDED IN SECTION 2
No. W-134 January 12, 1999
DIGITAL SOLUTIONS, INC.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, the receipt of which is hereby
acknowledged by Digital Solutions, Inc., a New Jersey corporation (the
"Company"), SR Capital Partners, LLC is hereby granted the right to purchase,
at any time from the date hereof until 5:00 P.M., New York City time, on
January 12, 2004, up to 75,000 (Seventy-Five Thousand) fully paid and
non-assessable shares of the Company's Common Stock, $.001 par value per share
("Common Stock").
This Warrant is exercisable at a per share price of $1.50 (the
"Exercise Price") payable in cash or by certified or official bank check in New
York Clearing House funds, subject to adjustment as provided in Section l
hereof. Upon surrender of this Warrant with the annexed Subscription Form duly
executed, together with payment of the Exercise Price for the shares of Common
Stock purchased at the Company's principal executive offices (presently located
at 300 Atrium Drive, Somerset, New Jersey 08873) the registered holder of the
Warrant ("holder") shall be entitled to receive a certificate or certificates
for the shares of Common Stock so purchased.
<PAGE> 59
1. Exercise of Warrant
1.1 The purchase rights represented by this Warrant are exercisable
at the option of the Holder hereof, in whole or in part (but not as to
fractional shares of the Common Stock) during any period in which this Warrant
may be exercised as set forth above. In the case of the purchase of less than
all the shares of Common Stock purchasable under this Warrant, the Company
shall cancel this Warrant upon the surrender thereof and shall execute and
deliver a new Warrant of like tenor for the balance of the shares of Common
Stock purchasable hereunder.
1.2 The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in the name of, or in
such names as may be directed by, the Holder hereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of such
certificate in a name other than that of the Holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
1.3 In case at any time or from time to time the Company shall
subdivide as a whole, split its Common Stock or issue a dividend payable in
shares or otherwise, the number of shares of Common Stock then outstanding into
a greater or lesser number of shares, the Warrant Price then in effect shall be
increased or reduced proportionately, and the number of shares issuable upon
exercise of this Warrant shall accordingly be increased or reduced
proportionately.
1.4 In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of this Warrant (other
than change in par value, or from par value to no par value, or from no par
value to par value, or as a result or a subdivision or combination), or in case
of any consolidation or merger of the Company with or into another corporation
(other than a merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of
2
<PAGE> 60
outstanding shares of Common Stock, other than a change in number of the shares
issuable upon exercise of the Warrant) or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Holder of this Warrant shall have the right
thereafter to exercise this Warrant into the kind and amount of shares of stock
and other securities and property receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a Holder of the number of
shares of Common Stock of the Company for which the Warrant might have been
exercised immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. The above provisions of this Section l.4 shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
1.5 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of this
Warrant. The Company covenants that all shares of Common Stock which shall be
so issuable shall be duly and validly issued and fully-paid and non-assessable.
1.6 Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange the Warrants represented by such
Holder's Warrant Certificate, in whole or in part (a "Warrant Exchange"), into
the number of fully paid and non-assessable Warrant Shares determined in
accordance with this Section 1.6, by surrendering such Warrant Certificate at
the principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating such Holder's intent to effect such exchange,
the number of Warrants (the "Total Share Number") to be exchanged and the date
on which the Holder requests that such Warrant Exchange occur (the "Notice of
Exchange"). The Warrant Exchange shall take place on the date specified in the
Notice of Exchange, or, if later, the date the Notice of Exchange is received
by the Company (the "Exchange Date"). Certificates for the Warrant Shares
issuable upon such Warrant Exchange and, if applicable, a new Warrant
Certificate of like tenor evidencing the balance of the Warrant Shares
remaining subject to the Holder's Warrant certificate, shall be issued as of
the Exchange Date and delivered to the Holder within three (3) days following
the
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<PAGE> 61
Exchange Date. In connection with any Warrant Exchange, the Holder's
Warrant certificate shall represent the right to subscribe for and acquire (1)
the number of Warrant Shares (rounded to the next highest integer) equal to (A)
the Total Share Number less (B) the number of Warrant Shares equal to the
quotient obtained by dividing (i) the product of the Total Share Number and the
then current Exercise Price per Warrant Share by (ii) the current Market Price
(as hereafter defined) of a share of Common Stock.
As used herein, the phrase "Market Price" at any date shall be deemed
to be the last reported sale price, or, in case no such reported sale takes
place on such day, the average of the last reported sale prices for the
preceding three trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted
to trading or as reported in the Nasdaq National Market System, or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq National Market System, the last reported sale
price as furnished by the National Association of Securities Dealers, Inc.
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or if the Common Stock is not quoted on Nasdaq, as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to it for the two days immediately preceding the
Exchange Date.
2. Restrictions on Transfer
The Holder acknowledges that he has been advised by the Company that
this Warrant and the shares of Common Stock (the "Warrant Shares") issuable
upon exercise thereof (collectively the "Securities") have not been registered
under the Securities Act of l933, as amended (the "Securities Act"), that the
Warrant is being issued, and the shares issuable upon exercise of the Warrant
will be issued, on the basis of the statutory exemption provided by section
4(2) of the Securities Act relating to transactions by an issuer not involving
any public offering, and that the Company's reliance upon this statutory
exemption is based in part upon the representations made by the Holder
contained herein. The Holder acknowledges that he has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Securities Act and the rules and regulations thereunder on the
transfer of securities. In particular, the Holder agrees that no sale,
assignment or transfer of the Securities shall be valid or
4
<PAGE> 62
effective, and the Company shall not be required to give any effect to any such
sale, assignment or transfer, unless (i) the sale, assignment or transfer of
the Securities is registered under the Securities Act, and the Company has no
obligations or intention to so register the Securities except as may otherwise
be provided herein, or (ii) the Securities are sold, assigned or transferred in
accordance with all the requirements and limitations of Rule l44 under the
Securities Act or such sale, assignment, or transfer is otherwise exempt from
registration under the Securities Act. The Holder represents and warrants that
he has acquired this Warrant and will acquire the Securities for his own
account for investment and not with a view to the sale or distribution thereof
or the granting of any participation therein, and that he has no present
intention of distributing or selling to others any of such interest or granting
any participation therein. The Holder acknowledges that the securities shall
bear the following legend:
"These securities have not been registered under the Securities Act
of l933. Such securities may not be sold or offered for sale,
transferred, hypothecated or otherwise assigned in the absence of an
effective registration statement with respect thereto under such Act
or an opinion of counsel to the Company that an exemption from
registration for such sale, offer, transfer, hypothecation or other
assignment is available under such Act."
3. Registration Rights
3.1 The Company shall advise the Holder of this Warrant or of the
Warrant Shares or any then Holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "Holders") by written notice at least
30 days prior to the filing by the Company with the Securities and Exchange
Commission of any registration statement under the Securities Act of l933 (the
"Act") covering securities of the Company, except on Forms S-4 or S-8 (or
similar successor form), and upon the request of any such Holder within ten
days after the date of such invoice, include in any such registration statement
such information as may be required to permit a public offering of the Warrant
Shares. The Company shall supply such number of prospectuses and other
documents as the Holder may reasonably request in order to facilitate the
public
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<PAGE> 63
sale or other disposition of the Warrant Shares, qualify the Warrant Shares for
sale in such states as any such Holder reasonably designates and do any and all
other acts and things which may be necessary or desirable to enable such
Holders to consummate the public sale or other disposition of the Warrant
Shares, and furnish indemnification in the manner as set forth in Subsection
3.2 of this Section 3. Such Holders shall furnish information and
indemnification as set forth in Subsection 3.2 of this Section 3. For the
purpose of the foregoing, inclusion of the Warrant Shares by the Holder in a
Registration Statement pursuant to this sub-paragraph 3.l under a condition
that the offer and/or sale of such Warrant Shares not commence until a date not
to exceed 90 days from the effective date of such registration statement shall
be deemed to be in compliance with this sub-paragraph 3.l.
3.2 The following provisions of this Section 3 shall also be
applicable to the exercise of the registration rights granted under this
Section 3.l:
(A) The foregoing registration rights shall be contingent on the
Holders furnishing the Company with such appropriate information (relating to
the intentions of such Holders) as the Company shall reasonably request in
writing. Following the effective date of such registration, the Company shall
upon the request of any owner of Warrants and/or Warrant Shares forthwith
supply such number of prospectuses meeting the requirements of the Act as shall
be requested by such owner to permit such Holder to make a public offering of
all Warrant Shares from time to time offered or sold to such Holder, provided
that such Holder shall from time to time furnish the Company with such
appropriate information (relating to the intentions of such Holder) as the
Company shall request in writing. The Company shall also use its best efforts
to qualify the Warrant Shares for sale in such states as such Holder shall
reasonably designate.
(B) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Subsection 3.l of this Section
3 notwithstanding that Warrant Shares subject to this Warrant may be included
in any such registration. Any Holder whose Warrant Shares are included in any
such registration statement pursuant to this Section 3 shall, however, bear the
fees of his own counsel and any registration fees, transfer taxes or
underwriting discounts or commissions applicable to the Warrant Shares sold by
him pursuant thereto.
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<PAGE> 64
(C) The Company shall indemnify and hold harmless each such
Holder and each underwriter, if any, within the meaning of the Act, who may
purchase from or sell for any such Holder any Warrant Shares from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereto or any
registration statement under the Act or any prospectus included therein
required to be filed or furnished by reason of this Section 3 or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in
writing to the Company by such Holder or underwriter expressly for use therein,
which indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that the Company
shall not be obliged so to indemnify any such Holder or underwriter or
controlling person unless such Holder or underwriter shall at the same time
agree to indemnify the Company, its directors, each officer signing the related
registration statement and each person, if any, who controls the Company within
the meaning of such Act, from and against any and all losses, claims, damages
and liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or any prospectus
required to be filed or furnished by reason of this Section 3 or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or alleged
untrue statement or omission based upon information furnished in writing to the
Company by any such Holder or underwriter expressly for use therein.
(D) The Company may withdraw the registration at any time.
4. Miscellaneous
4.1 All the covenants and agreements made by the Company in this
Warrant shall bind its successors and assigns.
7
<PAGE> 65
4.2 No recourse shall be had for any claim based hereon or otherwise
in any manner in respect hereof, against any incorporator, stockholder, officer
or director, past, present or future, of the Company or of any predecessor
corporation, whether by virtue of any constitutional provision or statute or
rule of law, or by the enforcement of any assessment or penalty or in any other
manner, all such liability being expressly waived and released by the
acceptance hereof and as part of the consideration for the issue hereof.
4.3 No course of dealing between the Company and the Holder hereof
shall operate as a waiver of any right of any Holder hereof, and no delay on
the part of the Holder in exercising any right hereunder shall so operate.
4.4 This Warrant may be amended only by a written instrument
executed by the Company and the Holder hereof. Any amendment shall be endorsed
upon this Warrant, and all future Holders shall be bound thereby.
4.5 All communications provided for herein shall be sent, except as
may be otherwise specifically provided, by registered or certified mail: if to
the Holder of this Warrant, to the address shown on the books of the Company;
and if to the Company, to Digital Solutions, Inc.,300 Atrium Drive, Somerset,
New Jersey 08873, attention: Office of the President, or to such other address
as the Company may advise the Holder of this Warrant in writing. Notices shall
be deemed given when mailed.
4.6 The provisions of this Warrant shall in all respects be
constructed according to, and the rights and liabilities of the parties hereto
shall in all respects be governed by, the laws of the State of New Jersey. This
Warrant shall be deemed a contract made under the laws of the State of New
Jersey and the validity of this Warrant and all rights and liabilities
hereunder shall be determined under the laws of said State.
4.7 The headings of the Sections of this Warrant are inserted for
convenience only and shall not be deemed to constitute a part of this Warrant.
8
<PAGE> 66
IN WITNESS WHEREOF, DIGITAL SOLUTIONS, INC. has caused this Warrant
to be executed in its corporate name by its officer, and its seal to be affixed
hereto.
Dated: January 12, 1999
DIGITAL SOLUTIONS, INC.
By: /s/DONALD W. KAPPAUF
----------------------------------
Donald W. Kappauf
President
9
<PAGE> 67
SUBSCRIPTION FORM
TO: Digital Solutions, Inc.
300 Atrium Drive
Somerset, New Jersey 08873
The undersigned holder hereby irrevocably elects to exercise the
right to purchase shares of Common Stock covered by this Warrant according to
the conditions hereof and herewith makes full payment of the Exercise Price of
such shares.
Kindly deliver to the undersigned a certificate representing the Shares.
INSTRUCTIONS FOR DELIVERY
Name:
------------------------------------------------------------
(please typewrite or print in block letters)
Address:
------------------------------------------------------------
Dated:
---------------------------
Signature
----------------------------------
10
<PAGE> 68
EX. 10.27
Mr. Donald W. Kappauf
President and Chief Executive Officer
Teamstaff Inc.
300 Atrium Drive
Somerset, New Jersey 08873
Re: Engagement for Investment Banking Services
Dear Mr. Kappauf:
We are pleased to set forth the terms of the retention of Donald & Co.
Securities Inc. ("Donald") by Teamstaff Inc. (the "Company") pursuant to which
Donald will serve as the Investment Bankers to the Company and provide the
services as set forth below.
1. Services:
(a) General and Other Services:
1) Overall Strategic Planning (Short and Long Term Strategies).
2) Capital requirements studies.
3) Investor relations coordination.
4) Advisors to Management and the Board of Directors.
5) Search for Strategic Partners.
(b) Assist in Merger and Acquisition Transactions:
1) Strategic Acquisition Planning.
2) Identify target acquisitions.
3) Work with management in the due diligence process.
4) Work with legal counsel on transaction structures and
issues.
5) Work with Company's accountants on financial/accounting
matters relating to transaction.
2. Fees:
(a) For Services provided in paragraphs 1(a) and (b) above the Company
shall issue warrants for the purchase of Three Hundred and Fifty Thousand
(350,000) shares of its common stock to Donald & Co. (the "Warrants"). The
Warrants shall be exercisable for a period of three (3) years from the date of
issuance, at a price equal to One Hundred and Ten (110%) Percent of the median
of closing bid and asked prices for the common stock of the Company on the date
of issuance. Donald shall have the right to transfer Fifty Thousand (50,000) of
the Warrants to Raymond Skiptunis. The Warrants shall be issued and delivered
to Donald & Co. within seven (7) business days of the execution of this
Agreement by the Company. Donald shall be granted a continuing right for a
period of three (3) years from the date of issuance of the Warrants, to
"piggyback" the shares of common stock of the Company underlying the Warrants
in any appropriate registration statement by which the Company registers its
securities. Donald
<PAGE> 69
Mr. David W. Kappauf
May 25, 2000
Page 2
warrants and represents its understanding that the Warrants and the shares of
common stock for which they are exercisable shall be subject to any reverse
split of outstanding common stock undertaken by the Company following the date
of this Agreement.
(b) In the event that Donald serves as a Placement Agent for the Company:
upon completion of any financing, whereby Donald acted as Placement Agent, the
Company agrees to pay or cause to be paid to Donald a success fee to be
negotiated at the time of the financing.
(c) For Services provided as Mergers and Acquisitions Advisors:
1) The Company shall pay a fee to Donald equal to: three (3)%
percent of the total consideration paid for any acquisition
commenced during the term of this Agreement for which Donald
participated in the identification of the merger or
acquisition candidate, or joint venture or other business
combination candidate (the "Acquisition Candidate"). For
completed transactions in which Donald did not participate in
the identification of the Acquisition Candidate, however
structured and negotiated the transaction, then said fee
shall be reduced to one (1%) percent of the total
consideration paid; provided, however, that Donald shall not
be entitled to a fee with respect to transactions in which
Raymond James serves as the Company's advisor. Said fee shall
be exclusive of any other fees due to Donald pursuant to
paragraphs 2.(a) and (b) above.
2) Such fees shall be earned if Donald participates in the
consummating of a transaction within twelve (12) months from
the date Donald last provided services relative to the
Company.
3. Expenses:
The Company shall reimburse Donald within fifteen (15) days of invoice
for any and all out-of-pocket expenses that directly relate to the
services as described herein. Any expenses greater than $500 shall
require previous verbal approval by the Company.
4. Indemnification
The Company agrees to indemnify and hold harmless Donald, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls Donald within the meaning of Section l5 of the Act or Section
20(a) of the Securities Exchange Act of l934, as amended (the "Exchange Act"),
against any and all losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements (and any and all
actions, suits, proceedings and investigations in respect thereof and any and
all legal and other costs, expenses and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise), including,
without limitation, the costs, expenses and disbursements, as and when
incurred, of investigating, preparing or defending any such action, suit,
proceeding or investigation (whether or not in connection with litigation in
which Donald is a party), directly or indirectly, caused by, relating to, based
upon, arising out of, or in connection with Donald's acting for the Company.
Any conduct by Donald which is grossly negligent or which constitutes
intentional misconduct is specifically excluded from this provision. Donald
agrees to
<PAGE> 70
Mr. David W. Kappauf
May 25, 2000
Page 3
indemnify and hold harmless the Company, its officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls the
Company on the same terms and conditions expressed in this Section against any
and all losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements arising out conduct by Donald
that is determined to be grossly negligent or constituting intentional
misconduct.
If any action, suit, proceeding or investigation is commenced, as to
which Donald proposes to demand indemnification, it shall notify the Company
with reasonable promptness, and the Company shall have the right to assume the
defense of such action (provided, however, that any failure by Donald to notify
the Company shall not relieve the Company from its obligations hereunder
unless, and to the extent, such failure compromises or prevents the Company's
defense of such action, suit, proceeding or investigation). Donald shall have
the right to retain counsel of its own choice to represent it, but the fees and
expenses of such counsel shall be at its expense unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have promptly employed
counsel reasonably satisfactory to Donald to have charge of the defense of such
action or Donald shall have reasonably concluded that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall
be borne by the Company. Any such counsel of Donald shall, to the extent
consistent with its professional responsibilities, cooperate with the Company
and any counsel designated by the Company. The Company shall be liable for any
settlement of any claim against Donald made with the Company's written consent,
which consent shall not be unreasonably withheld. The Company shall not,
without the prior written consent of Donald, settle or compromise any claim, or
permit a default or consent to the entry of any judgment in respect thereof,
unless such settlement, compromise or consent includes, as a unconditional term
thereof, the giving by the claimant to Donald of an unconditional release from
all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification in such
case, then the Company, on the one hand, and Donald, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, Donald, on the other hand, and also the relative
fault of the Company, on the one hand, and Donald, on the other hand, in
connection with the statements, acts or omissions which resulted in such
losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses or disbursements and the relevant equitable
considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any person
who is not also found liable for such fraudulent misrepresentation.
The Company will promptly reimburse Donald and any other person
indemnified hereunder for all reasonable legal and other expenses, as incurred,
in connection with investigating, defending, or otherwise handling such loss,
claim, damage, liability, fine, judgment, settlement, action, investigation or
proceeding. Neither termination nor completion of the engagement of Donald
referred to above shall affect these indemnification provisions which shall
remain operative and in full force and effect and this
<PAGE> 71
Mr. David W. Kappauf
May 25, 2000
Page 2
paragraph shall survive the termination of this Agreement.
5. Termination:
Either party may terminate this agreement: (i) for cause at any time;
(ii) for any reason effective forty-five (45) days after written notice
of termination, provided, however, that (A) in no event shall the Company
have the right to terminate this Agreement, other than for cause, prior
to eighteen (18) months and (B) in no event shall Donald have the right
to terminate this Agreement, other than for cause, prior to twelve (12)
months. Notwithstanding termination, the Company's obligation shall
continue as to all unpaid fees, and unreimbursed expenses still owing
hereunder.
6. Governing Law:
This Agreement shall be governed by and construed under the laws of the
State of New York.
If this letter is consistent with our understanding, please sign both
copies of this letter and return one copy to me. It is a great pleasure to be
working with you.
DONALD & CO. SECURITIES INC.
By:
------------------------------
Stephen A. Blum, President
ACCEPTED AND AGREED TO:
TEAMSTAFF INC.
By:
--------------------------------
Donald W. Kappauf, President and
Chief Executive Officer
Date:
-----------------------------
<PAGE> 72
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of October, 1999 by and between
Donald W. Kappauf, residing at1044 Tullo Farm Road, Bridgewater, New Jersey
08807 (hereinafter referred to as the "Employee") and TEAMSTAFF, INC., a New
Jersey corporation with principal offices located at 300 Atrium Drive,
Somerset, New Jersey 08873 (hereinafter referred to as the "Company").
W I T N E S S E T H :
WHEREAS, the Company and its subsidiaries are engaged in the business
of providing Human Resource Administrative Services; and
WHEREAS, the Company desires to employ the Employee for the purpose of
securing for the Company the experience, ability and services of the Employee;
and
WHEREAS, the Employee desires to be employed with the Company,
pursuant to the terms and conditions herein set forth, superseding all prior
agreements between the Company, its subsidiaries and/or predecessors and
Employee;
NOW, THEREFORE, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE I
EMPLOYMENT
1.1 Subject to and upon the terms and conditions of this Agreement,
the Company hereby employs and agrees to continue the employment of the
Employee, and the Employee hereby accepts such continued employment in his
capacity as President, Chief Executive Officer and Corporate Secretary.
<PAGE> 73
ARTICLE II
DUTIES
2.1 The Employee shall, during the term of his employment with the
Company, and subject to the direction and control of the Company's Board of
Directors, perform such duties and functions as he may be called upon to
perform by the Company's Board of Directors during the term of this Agreement.
2.2 The Employee agrees to devote full business time and his best
efforts in the performance of his duties for the Company and any subsidiary
corporation of the Company.
2.3 The Employee shall perform, in conjunction with the Company's
Executive Management, to the best of his ability the following services and
duties for the Company and its subsidiary corporations (by way of example, and
not by way of limitation):
(i) Those duties attendant to the position with the Company
for which he is hired;
(ii) Establish and implement current and long range
objectives, plans, and policies, subject to the approval of the Board of
Directors;
(iii) Financial planning including the development of,
liaison with, financing sources and investment bankers;
(iv) Managerial oversight of the Company's business;
(v) Shareholder's relations;
(vi) Ensure that all Company activities and operations are
carried out in compliance with local, state and federal regulations and laws
governing business operations.
(vii) Business expansion of the Company including
acquisitions, joint ventures, and other opportunities; and
(viii) Promotion of the relationships of the Company and its
subsidiaries with their respective employees, customers, suppliers and others
in the business community.
<PAGE> 74
2.4 Employee shall be based in the New Jersey area, and shall
undertake such occasional travel, within or without the United States as is or
may be reasonably necessary in the interests of the Company. The Company will
not base Employee in any other office without Employee's express written
consent.
ARTICLE III
COMPENSATION
3.1 Commencing the date hereof and during the term hereof, Employee
shall be compensated initially at the rate of $225,000 per annum, subject to
such increases to be determined on each 12-month anniversary during the term of
this Agreement (the "Base Salary"), which shall be paid to Employee as in
accordance with the Company's regular payroll periods.
3.2 Employee shall be entitled to receive a bonus (the "Bonus") in
accordance with the Company's Executive Officer Bonus Program to be determined
at the commencement of each fiscal year; provided, however, for the fiscal year
ended September 30, 2000, Employee shall be entitled to be paid as a Bonus
provided that in Schedule A annexed hereto.
3.3 The Company shall deduct from Employee's compensation all federal,
state, and local taxes which it may now or may hereafter be required to deduct.
3.4 Employee may receive such other additional compensation as may be
determined from time to time by the Board of Directors including bonuses and
nonqualified executive benefit plans such as a split dollar life insurance
arrangement, supplemental executive retirement plan ("SERP") and other long
term compensation plans. Nothing herein shall be deemed or construed to require
the Board to award any bonus or additional compensation except a split dollar
life insurance arrangement, the terms of which will be subject to the
reasonable agreement of the Employee and the Board.
ARTICLE IV
<PAGE> 75
BENEFITS
4.1 During the term hereof, the Company shall provide Employee with
group health care and insurance benefits as generally made available to the
Company's senior management; provide such other insurance benefits obtained by
the Company and made generally available to the Company's senior management;
reimburse the Employee, upon presentation of appropriate vouchers, for all
reasonable business expenses incurred by the Employee on behalf of the Company
upon presentation of suitable documentation; and pay to Employee the sum of
$1,000 per month as and for an automobile allowance.
4.2 In the event the Company wishes to obtain Key Man life insurance
on the life of Employee, Employee agrees to cooperate with the Company in
completing any applications necessary to obtain such insurance and promptly
submit to such physical examinations and furnish such information as any
proposed insurance carrier may request.
4.3 For each year of the term hereof, Employee shall be entitled
to six (6) weeks paid vacation.
ARTICLE V
NON-DISCLOSURE
5.1 The Employee shall not, at any time during or after the
termination of his employment hereunder, except when acting on behalf of and
with the authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
marketing, computerized payroll, accounting and information business, personnel
and/or employee leasing business of the Company and its subsidiaries, including
information relating to any customer of the Company or pool of temporary
employees, or any other nonpublic business information of the Company and/or
its subsidiaries learned as a consequence of Employee's employment with the
Company (collectively referred to as the
<PAGE> 76
"Proprietary Information"). For the purposes of this Agreement, trade secrets
and confidential information shall mean information disclosed to the Employee
or known by him as a consequence of his employment by the Company, whether or
not pursuant to this Agreement, and not generally known in the industry. The
Employee acknowledges that trade secrets and other items of confidential
information, as they may exist from time to time, are valuable and unique
assets of the Company, and that disclosure of any such information would cause
substantial injury to the Company.
ARTICLE VI
RESTRICTIVE COVENANT
6.1 In the event of the voluntary termination of employment with the
Company prior to the expiration of the term hereof, or Employee's discharge in
accordance with Article VIII, or the expiration of the term hereof without
renewal, Employee agrees that he will not, for a period of one (1) year
following such termination (or expiration, as the case may be) directly or
indirectly enter into or become associated with or engage in any other business
(whether as a partner, officer, director, shareholder, employee, consultant, or
otherwise), which business is located in the States of Florida, New Jersey, New
York, and Texas or any other state the Company is operating in and is involved
in the professional employer organization business, or is otherwise engaged in
the same or similar business as the Company shall be engaged and is in direct
competition with the Company, or which the Company is in the process of
developing, during the tenure of Employee's employment by the Company.
Notwithstanding the foregoing, the ownership by Employee of less than 5 percent
of the shares of any publicly held corporation shall not violate the provisions
of this Article VI.
6.2 In furtherance of the foregoing, Employee shall not during the
aforesaid period of non-competition, directly or indirectly, in connection with
any computerized payroll, employee leasing, or permanent or temporary personnel
business, or any business similar to the business in
<PAGE> 77
which the Company was engaged, or in the process of developing during
Employee's tenure with the Company, solicit any customer or employee of the
Company who was a customer or employee of the Company during the tenure of his
employment.
6.3 If any court shall hold that the duration of non-competition or
any other restriction contained in this Article is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed amended
to delete therefrom such provision or portion adjudicated to be invalid or
unenforceable or, in the alternative, such judicially substituted term may be
substituted therefor.
ARTICLE VII
TERM
7.1 This Agreement shall be for a term of two (2) years commencing
October 1, 1999 and terminating on September 30, 2001 unless sooner terminated
as provided for herein (the "Expiration Date").
7.2 Unless this Agreement is earlier terminated pursuant to the terms
hereof, the Company agrees to notify Employee in writing whether it intends to
negotiate a renewal of this Agreement by notice six (6) months prior to the
Expiration Date. In the event the Company fails to so notify the Employee, the
term of this Agreement shall be extended for an additional one (1) year.
7.3 If the Company elects not to seek to renegotiate a renewal as
provided in paragraph 7.2 above, or if the Company fails to reach agreement
with Employee as to the terms of renewal, upon the termination of Employee's
employment with the Company for any reason after the Expiration Date, the
Company shall pay to Employee, in addition to any other payments due hereunder,
a severance payment equal to twelve months of Employee's Base Salary
("Severance Payments") payable in twelve equal monthly installments commencing
on the first day of the first month following the date of such termination;
provided, however, if Employee secures alternate
<PAGE> 78
employment within such twelve month period, the Company will be responsible
only for the negative difference between the severance payments and the amount
derived from such alternative employment.
7.4 In the event this Agreement expires without renewal, or is
terminated for any reason except for cause, the Company shall pay for executive
outplacement services.
ARTICLE VIII
DISABILITY DURING TERM
8.1 In the event Employee becomes totally disabled so that he is
unable or prevented from performing any one or all of his usual duties
hereunder for a period of four (4) consecutive months, and the Company elects
to terminate this agreement in accordance with Article IX, paragraph (B) then,
and in that event, Employee shall receive his Base Salary as provided under
Article III of this Agreement for a period of twelve (12) months commencing
from the date of such total disability or the balance of the original term of
this agreement, whichever is greater. The obligation of the Company to make the
aforesaid payments shall be modified and reduced and the Company shall receive
a credit for all disability insurance payments which Employee may receive from
insurance policies provided by the Company.
ARTICLE IX
TERMINATION
9.1 The Company may terminate this Agreement:
a. Upon the death of Employee during the term hereof, except that
the Employee's legal representatives, successors, assigns, and heirs shall have
those rights and interests as otherwise provided in this Agreement, including
the right to receive accrued but unpaid incentive compensation and special
bonus compensation on a pro rata basis.
b. Subject to the terms of Article VIII, upon written notice from
the Company to the Employee, if Employee becomes totally disabled and as a
result of such total disability, has
<PAGE> 79
been prevented from and unable to perform all of his duties hereunder for a
consecutive period of four (4) months.
c. Upon written notice from the Company to the Employee, at
any time for "Cause." For purposes of this Agreement, "Cause" shall be defined
as: (i) willful disobedience by the Employee of a material and lawful
instruction of the Board of Directors of the Company; (ii) conviction of the
Employee of any misdemeanor involving fraud or embezzlement or similar crime,
or any felony; (iii) breach by the Employee of any material provision of this
Agreement; (iv) conduct amounting to fraud, dishonesty, negligence, willful
misconduct or recurring insubordination; (v) inattention to or unsatisfactory
performance of duties which adversely affects operations of the Company; or
(vi) excessive absences from work, provided that the Company shall not have the
right to terminate the employment of Employee pursuant to the foregoing clauses
(iii) and (v) above unless written notice specifying such breach shall have
been given to the Employee and, in the case of breach which is capable of being
cured, the Employee shall have failed to cure such breach within thirty (30)
days after his receipt of such notice.
9.2 In the event the Company demotes, substantially reduces the duties
of or reduces the salary or benefits of the employee, the employee may elect to
treat this Agreement as terminated for "good reason" upon ten (10) days prior
written notice to the Company. In the event of termination of this Agreement
for good reason, the employee shall be entitled to payment of the greater of
all salary, benefits and stock grants or options due for the remaining term of
the Agreement or the severance payments as defined in Article VII herein, in
addition to any rights or remedies available to the employee at law or in
equity.
9.3 In the event of the termination of this Agreement and the
discharge of Employee by the Company in breach and violation of this Agreement,
Employee shall not be obligated to mitigate damages by seeking or obtaining
alternate employment.
<PAGE> 80
ARTICLE X
TERMINATION OF PRIOR AGREEMENTS
10.1 This Agreement sets forth the entire agreement between the
parties and supersedes all prior agreements between the parties, whether oral
or written prior to the effective date of this Agreement.
ARTICLE XI
STOCK OPTIONS
11.1 As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee options to purchase shares of the Company's
Common Stock, $.001 par value, as follows:
Subject to the terms and conditions of the Company's Senior
Management Incentive Plan (the "Plan"), and the terms and conditions set forth
in the Stock Option Certificate which are incorporated herein by reference, the
Employee is hereby granted options to purchase 200,000 shares of the Company's
Common Stock, of which options to purchase 100,000 shares shall vest
immediately, 50,000 shall vest on the first anniversary hereof, and the balance
shall vest on the second anniversary hereof. The exercise price of the option
shall be $1.0625 per share and shall contain such other terms and conditions as
set forth in the stock option agreement. The foregoing options shall be
qualified as incentive stock options to the maximum as allowed by law. The
Options provided for herein are not transferable by Employee and shall be
exercised only by Employee, or by his legal representative or executor, as
provided in the Plan. Such Option shall terminate as provided in the Plan.
<PAGE> 81
ARTICLE XII
EXTRAORDINARY TRANSACTIONS
12.1 The Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication
of members of the Company's management, including the Employee, to their
assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a change in control of the Company. A "Change
in Control" of the Company shall be deemed to have occurred if there shall be
consummated (i)(x) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approved any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any person (as such term is used in Sections 13(d) and
l3(d)(2) of the Securities Exchange Act of l934, as amended (the "Exchange
Act")), shall become the beneficial owner (within the meaning of Rule l3d-3
under the Exchange Act) of 20% or more of the Company's outstanding Common
Stock, except in connection with a transaction approved by the Board of
Directors; or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
12.2 The Company agrees that, if during the term hereof, or during
such time as the
<PAGE> 82
Employee is otherwise employed by the Company, a Change in Control shall occur,
all additional compensation arrangements and plans provided Employee under
paragraph 3.3 shall be funded to the maximum allowable under their terms and
all options to purchase Common Stock of the Company held by Employee, either
pursuant to this Agreement or otherwise, shall immediately vest and become
exercisable on the first day following a Change in Control. Further, the
options shall be deemed amended to provide that in the event of termination
after an event enumerated in this Article XII, the options shall remain
exercisable for the duration of their term; and further, at the Employee's
option, an amount equal to three times the aggregate annual compensation paid
to the Employee during the calendar year preceding the Change in Control shall
be credited against the exercise price of any options held by Employee at the
time Employee elects to exercise such options; provided, however, that if the
lump sum severance payment under this Article XII, either alone or together
with other payments which the Employee has the right to receive from the
Company, would constitute a "parachute payment" (as defined in Section 280G of
the Internal Revenue Code of l954, as amended (the "Code")), such credit shall
be reduced to the largest amount as will result in no portion of the credit
under this Article XII being subject to the excise tax imposed by Section 4999
of the Code.
ARTICLE XIII
ARBITRATION AND INDEMNIFICATION
13.1 Any dispute arising out of the interpretation, application,
and/or performance of this Agreement with the sole exception of any claim,
breach, or violation arising under Articles V or VI hereof shall be settled
through final and binding arbitration before a single arbitrator in the State
of New Jersey in accordance with the Rules of the American Arbitration
Association. The arbitrator shall be selected by the Association and shall be
an attorney-at-law experienced in the field of corporate law. Any judgment upon
any arbitration award may be entered in any court, federal or state, having
competent jurisdiction of the parties.
<PAGE> 83
13.2 The Company hereby agrees to indemnify, defend, and hold harmless
the Employee for any and all claims arising from or related to his employment
by the Company at any time asserted, at any place asserted, and to the fullest
extent permitted by law. The Company shall maintain such insurance as is
necessary and reasonable to protect the Employee from any and all claims
arising from or in connection with his employment by the Company, provided such
insurance can be obtained without unreasonable effort and expense.
ARTICLE XIV
SEVERABILITY any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE XV
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person, with written acknowledgment received, or
mailed by certified mail, return receipt requested, as follows:
IF TO THE COMPANY: TeamStaff, Inc.
300 Atrium Drive
Somerset, NJ 08873
IF TO THE EMPLOYEE: Donald W. Kappauf
1044 Tullo Farm Road
Bridgewater, NJ 08807
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph. Notice shall be effective
three (3) days after delivery or mailing.
<PAGE> 84
ARTICLE XVI
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and personal
representatives of the Employee.
ARTICLE XVII
WAIVER
The waiver by either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of construction and validity.
ARTICLE XVIII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of New
Jersey shall govern its construction and validity.
ARTICLE XIX
JURISDICTION
Any or all actions or proceedings which may be brought by the Company
or Employee under this Agreement shall be brought in courts having a situs
within the State of New Jersey, and Employee and the Company each hereby
consent to the jurisdiction of any local, state, or federal court located
within the State of New Jersey.
<PAGE> 85
ARTICLE XX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition, or amendment shall be made hereto, except by
written agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.
(Corporate Seal) TEAMSTAFF, INC.
/s/ KARL W. DIECKMANN
-----------------------------------
[SEAL] Karl W. Dieckmann
Chairman of the Board
/s/ DONALD W. KAPPAUF
--------------------------
Donald W. Kappauf
Employee
<PAGE> 86
Schedule A
(A) For the fiscal year ended September 30, 2000, Employee shall be
entitled to be paid as a Bonus a percentage of the net pre-tax profit of the
Company as determined by the Company's independent auditors no later than 75
days following the end of the Company's fiscal year without giving effect to
tax loss carry forwards or the payment of any bonus under the Company's
Executive Officer Bonus Program (the "EBT") as follows: (1) if EBT is at least
$3,115,380 but less than $3,894,225, a percentage of EBT determined as follows:
(a) the sum of 4% plus the percentage equal to the amount of EBT earned in
excess of $3,115,000 divided by 778,845 and multiplied by 2; (2) if EBT is at
least $3,894,225 but less than $5,062,500, a percentage EBT determined as
follows: (a) the sum of 6% plus the percentage equal to the amount of EBT
earned in excess of $3,894,225 divided by 1,168,275 and multiplied by 2; and
(3) if EBT is equal to or in excess of $5,062,500, 8% of EBT; provided that in
the event EBT is less than $3,115,380 no bonus shall be paid by the Company to
the Employee other than at the discretion of the Compensation Committee. Such
determination, for Bonus purposes only, shall be made in accordance with
generally accepted accounting principles, as modified by this Schedule A.
(B) In the event the Company consummates a divestiture (a
"Divestiture") of a subsidiary or business unit, the EBT required for each
percentage level of Bonus shall be proportionately adjusted downward based on
the Company's profit plan projections to reflect the loss of EBT for the
remainder of the fiscal year attributable to the divested business unit or
subsidiary. A Divestiture does not include a transaction involving the sale of
all or substantially all of the assets of the Company.
<PAGE> 87
EXHIBIT 10.33
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of October, 1999 by and between
Donald T. Kelly, residing at 458 Fairmont Avenue, Chatham, New Jersey 07928
(hereinafter referred to as the "Employee") and TEAMSTAFF, INC., a New Jersey
corporation with principal offices located at 300 Atrium Drive, Somerset, New
Jersey 08873 (hereinafter referred to as the "Company").
W I T N E S S E T H :
WHEREAS, the Company and its subsidiaries are engaged in the business
of providing Human Resource Administrative Services; and
WHEREAS, the Company desires to employ the Employee for the purpose of
securing for the Company the experience, ability and services of the Employee;
and
WHEREAS, the Employee desires to be employed with the Company,
pursuant to the terms and conditions herein set forth, superseding all prior
agreements between the Company, its subsidiaries and/or predecessors and
Employee;
NOW, THEREFORE, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE I
EMPLOYMENT
1.1 Subject to and upon the terms and conditions of this Agreement,
the Company hereby employs and agrees to continue the employment of the
Employee, and the Employee hereby accepts such continued employment in his
capacity as Vice-President, Chief Financial Officer and Corporate Secretary.
<PAGE> 88
ARTICLE II
DUTIES
2.1 The Employee shall, during the term of his employment with the
Company, and subject to the direction and control of the Company's CEO, perform
such duties and functions as he may be called upon to perform by the Company's
CEO during the term of this Agreement.
2.2 The Employee agrees to devote full business time and his best
efforts in the performance of his duties for the Company and any subsidiary
corporation of the Company.
2.3 The Employee shall perform, in conjunction with the Company's
Executive Management, to the best of his ability the following services and
duties for the Company and its subsidiary corporations (by way of example, and
not by way of limitation):
(i) Those duties attendant to the position with the Company
for which he is hired;
(ii) Establish and implement current and long range
objectives, plans, and policies, subject to the approval of the CEO and Board
of Directors;
(iii) Financial planning for the Company;
(iv) Managerial oversight of the Company's accounting
department;
(v) Primary responsibility for the preparation and filing of
all financial activity reports with federal and state regulatory authorities;
(vi) Acting as Corporate Secretary of the Company and its
subsidiaries;
(vii)Promotion of the relationships of the Company and its
subsidiaries with their respective employees, customers, suppliers,
shareholders, analysts, market makers and others in the business community.
<PAGE> 89
2.4 Employee shall be based in the New Jersey area and shall undertake
such travel, within or outside the United States, as is or may be reasonably
necessary in the interests of the Company.
ARTICLE III
COMPENSATION
3.1 Commencing the date hereof and during the term hereof, Employee
shall be compensated initially at the rate of $_______ per annum, subject to
such increases to be determined on each 12-month anniversary during the term of
this Agreement (the "Base Salary"), which shall be paid to Employee as in
accordance with the Company's regular payroll periods.
3.2 Employee shall be entitled to receive a bonus (the "Bonus") in
accordance with the Company's Executive Officer Bonus Program to be determined
at the commencement of each fiscal year; provided, however, for the fiscal year
ended September 30, 2000, Employee shall be entitled to be paid as a Bonus __%
percent of the net pre-tax profit of the Company as determined by the Company's
independent auditors no later than 75 days following the end of the Company's
fiscal year without giving effect to tax loss carry forwards or the payment of
any bonus under the Company's Executive Officer Bonus Program (the "EBT") up to
$______ of EBT, plus __% of the EBT over $__________; provided that in the
event the EBT is less than $________, no bonus shall be paid by the Company to
the Employee other than at the discretion of the Compensation Committee. Such
determination, for Bonus purposes only, shall be made in accordance with
generally accepted accounting principles, as modified by these resolutions.
3.3 The Company shall deduct from Employee's compensation all federal,
state, and local taxes which it may now or may hereafter be required to deduct.
<PAGE> 90
ARTICLE IV
BENEFITS
4.1 During the term hereof, the Company shall provide Employee with
group health care and insurance benefits as generally made available to the
Company's senior management; provide such other insurance benefits obtained by
the Company and made generally available to the Company's senior management;
reimburse the Employee, upon presentation of appropriate vouchers, for all
reasonable business expenses incurred by the Employee on behalf of the Company
upon presentation of suitable documentation; and pay to Employee the sum of
$800 per month as and for an automobile allowance.
4.2 In the event the Company wishes to obtain Key Man life insurance
on the life of Employee, Employee agrees to cooperate with the Company in
completing any applications necessary to obtain such insurance and promptly
submit to such physical examinations and furnish such information as any
proposed insurance carrier may request.
4.3 For each year of the term hereof, Employee shall be initially
entitled to five (5) weeks paid vacation.
ARTICLE V
NON-DISCLOSURE
5.1 The Employee shall not, at any time during or after the
termination of his employment hereunder, except when acting on behalf of and
with the authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
marketing, computerized payroll, accounting and information business, personnel
and/or employee leasing business of the Company and its subsidiaries, including
information relating to any customer of the Company or pool of temporary
employees, or any
<PAGE> 91
other nonpublic business information of the Company and/or its subsidiaries
learned as a consequence of Employee's employment with the Company
(collectively referred to as the "Proprietary Information"). For the purposes
of this Agreement, trade secrets and confidential information shall mean
information disclosed to the Employee or known by him as a consequence of his
employment by the Company, whether or not pursuant to this Agreement, and not
generally known in the industry. The Employee acknowledges that trade secrets
and other items of confidential information, as they may exist from time to
time, are valuable and unique assets of the Company, and that disclosure of any
such information would cause substantial injury to the Company.
ARTICLE VI
RESTRICTIVE COVENANT
6.1 In the event of the voluntary termination of employment with the
Company prior to the expiration of the term hereof, or Employee's discharge in
accordance with Article VIII, or the expiration of the term hereof without
renewal, Employee agrees that he will not, for a period of one (1) year
following such termination (or expiration, as the case may be) directly or
indirectly enter into or become associated with or engage in any other business
(whether as a partner, officer, director, shareholder, employee, consultant, or
otherwise), which business is located in the States of Florida, New Jersey, New
York, and Texas or any other state the Company is operating in and is involved
in the professional employer organization business, or is otherwise engaged in
the same or similar business as the Company shall be engaged and is in direct
competition with the Company, or which the Company is in the process of
developing, during the tenure of Employee's employment by the Company.
Notwithstanding the foregoing, the ownership by Employee of less than 5 percent
of the shares of any publicly held corporation shall not violate the provisions
of this Article VI.
6.2 In furtherance of the foregoing, Employee shall not during the
aforesaid period
<PAGE> 92
of non-competition, directly or indirectly, in connection with any computerized
payroll, employee leasing, or permanent or temporary personnel business, or any
business similar to the business in which the Company was engaged, or in the
process of developing during Employee's tenure with the Company, solicit any
customer or employee of the Company who was a customer or employee of the
Company during the tenure of his employment.
6.3 If any court shall hold that the duration of non-competition or
any other restriction contained in this Article is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed amended
to delete therefrom such provision or portion adjudicated to be invalid or
unenforceable or, in the alternative, such judicially substituted term may be
substituted therefor.
ARTICLE VII
TERM
7.1 This Agreement shall be for a term of two (2) years commencing
October 1, 1999 and terminating on September 30, 2001 unless sooner terminated
as provided for herein (the "Expiration Date").
7.2 Unless this Agreement is earlier terminated pursuant to the terms
hereof, the Company agrees to notify Employee in writing whether it intends to
negotiate a renewal of this Agreement by notice six (6) months prior to the
Expiration Date. In the event the Company fails to so notify the Employee, the
term of this Agreement shall be extended for an additional one (1) year.
7.3 If the Company elects not to seek to renegotiate a renewal as
provided in paragraph 7.2 above, or if the Company fails to reach agreement
with Employee as to the terms of renewal, upon the termination of Employee's
employment with the Company for any reason after the Expiration Date, the
Company shall pay to Employee, in addition to any other payments due hereunder,
a severance payment equal to twelve months of Employee's Base
<PAGE> 93
Salary ("Severance Payments") payable in twelve equal monthly installments
commencing on the first day of the first month following the date of such
termination; provided, however, if Employee secures alternate employment within
such twelve month period, the Company will be responsible only for the negative
difference between the severance payments and the amount derived from such
alternative employment.
7.4 In the event this Agreement expires without renewal, or is
terminated for any reason except for cause, the Company shall pay up to
$_______, upon request of the Employee, for executive outplacement services.
ARTICLE VIII
DISABILITY DURING TERM
8.1 In the event Employee becomes totally disabled so that he is
unable or prevented from performing any one or all of his usual duties
hereunder for a period of four (4) consecutive months, and the Company elects
to terminate this agreement in accordance with Article IX, paragraph (B) then,
and in that event, Employee shall receive his Base Salary as provided under
Article III of this Agreement for a period of twelve (12) months commencing
from the date of such total disability or the balance of the original term of
this agreement, whichever is greater. The obligation of the Company to make the
aforesaid payments shall be modified and reduced and the Company shall receive
a credit for all disability insurance payments which Employee may receive from
insurance policies provided by the Company.
ARTICLE IX
TERMINATION
9.1 The Company may terminate this Agreement:
a. Upon the death of Employee during the term hereof, except
that the Employee's legal representatives, successors, assigns, and heirs shall
have those rights and interests as otherwise provided in this Agreement,
including the right to receive accrued but unpaid incentive compensation and
special bonus compensation on a pro rata basis.
<PAGE> 94
b. Subject to the terms of Article VIII, upon written notice
from the Company to the Employee, if Employee becomes totally disabled and as a
result of such total disability, has been prevented from and unable to perform
all of his duties hereunder for a consecutive period of four (4) months.
c. Upon written notice from the Company to the Employee, at
any time for "Cause." For purposes of this Agreement, "Cause" shall be defined
as: willful disobedience by the Employee of a material and lawful instruction
of the CEO or the Board of Directors of the Company; conviction of the Employee
of any misdemeanor involving fraud or embezzlement or similar crime, or any
felony; breach by the Employee of any material provision of this Agreement; or
conduct amounting to fraud, dishonesty, negligence, willful misconduct,
recurring insubordination, inattention to or unsatisfactory performance of
duties which adversely affects operations of the Company, or excessive absences
from work, provided that the Company shall not have the right to terminate the
employment of Employee pursuant to the foregoing clauses (a) and (b) above
unless written notice specifying such breach shall have been given to the
Employee and, in the case of breach which is capable of being cured, the
Employee shall have failed to cure such breach within thirty (30) days after
his receipt of such notice.
9.2 In the event the Company demotes, substantially reduces the duties
of or reduces the salary or benefits of the employee, the employee may elect to
treat this Agreement as terminated for "good reason" upon ten (10) days prior
written notice to the Company. In the event of termination of this Agreement
for good reason, the employee shall be entitled to payment of the greater of
all salary, benefits and stock grants or options due for the remaining term of
the Agreement or the severance payments as defined in Article VII herein, in
addition to any rights or remedies available to the employee at law or in
equity.
9.3 In the event of the termination of this Agreement and the
discharge of Employee by the Company in breach and violation of this Agreement,
Employee shall not be obligated to
<PAGE> 95
mitigate damages by seeking or obtaining alternate employment.
ARTICLE X
TERMINATION OF PRIOR AGREEMENTS
10.1 This Agreement sets forth the entire agreement between the
parties and supersedes all prior agreements between the parties, whether oral
or written prior to the effective date of this Agreement.
ARTICLE XI
STOCK OPTIONS
11.1 As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee options to purchase shares of the Company's
Common Stock, $.001 par value, as follows:
Subject to the terms and conditions of the Company's Senior
Management Incentive Plan (the "Plan"), and the terms and conditions set forth
in the Stock Option Certificate which are incorporated herein by reference, the
Employee is hereby granted options to purchase 50,000 shares of the Company's
Common Stock which options shall vest __________________. The option shall
contain such other terms and conditions as set forth in the stock option
agreement. The exercise price of the options shall be the closing market price
of the Common Stock on the date hereof as determined under the Plan. The
foregoing options shall be qualified as incentive stock options to the maximum
as allowed by law. The Options provided for herein are not transferable by
Employee and shall be exercised only by Employee, or by his legal
representative or executor, as provided in the Plan. Such Option shall
terminate as provided in the Plan.
<PAGE> 96
ARTICLE XII
EXTRAORDINARY TRANSACTIONS
12.1 The Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication
of members of the Company's management, including the Employee, to their
assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a change in control of the Company. A "Change
in Control" of the Company shall be deemed to have occurred if there shall be
consummated (i)(x) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (ii) the stockholders of
the Company approved any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any person (as such term is used in Sections 13(d) and
l3(d)(2) of the Securities Exchange Act of l934, as amended (the "Exchange
Act")), shall become the beneficial owner (within the meaning of Rule l3d-3
under the Exchange Act) of 20% or more of the Company's outstanding Common
Stock, except in connection with a transaction approved by the Board of
Directors; or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
<PAGE> 97
12.2 The Company agrees that, if during the term hereof, or during
such time as the Employee is otherwise employed by the Company, a Change in
Control shall occur, all options to purchase Common Stock of the Company held
by Employee, either pursuant to this Agreement or otherwise, shall immediately
vest and become exercisable on the first day following a Change in Control.
Further, the options shall be deemed amended to provide that in the event of
termination after an event enumerated in this Article X, the options shall
remain exercisable for the duration of their term; and further, at the
Employee's option, an amount equal to three times the aggregate annual
compensation paid to the Employee during the calendar year preceding the Change
in Control shall be credited against the exercise price of any options held by
Employee at the time Employee elects to exercise such options; provided,
however, that if the lump sum severance payment under this Article XI, either
alone or together with other payments which the Employee has the right to
receive from the Company, would constitute a "parachute payment" (as defined in
Section 280G of the Internal Revenue Code of l954, as amended (the "Code")),
such credit shall be reduced to the largest amount as will result in no portion
of the credit under this Article XI being subject to the excise tax imposed by
Section 4999 of the Code.
<PAGE> 98
ARTICLE XIII
ARBITRATION AND INDEMNIFICATION
13.1 Any dispute arising out of the interpretation, application,
and/or performance of this Agreement with the sole exception of any claim,
breach, or violation arising under Articles V or VI hereof shall be settled
through final and binding arbitration before a single arbitrator in the State
of New Jersey in accordance with the Rules of the American Arbitration
Association. The arbitrator shall be selected by the Association and shall be
an attorney-at-law experienced in the field of corporate law. Any judgment upon
any arbitration award may be entered in any court, federal or state, having
competent jurisdiction of the parties.
13.2 The Company hereby agrees to indemnify, defend, and hold harmless
the Employee for any and all claims arising from or related to his employment
by the Company at any time asserted, at any place asserted, and to the fullest
extent permitted by law. The Company shall maintain such insurance as is
necessary and reasonable to protect the Employee from any and all claims
arising from or in connection with his employment by the Company, provided such
insurance can be obtained without unreasonable effort and expense.
ARTICLE XIV
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
<PAGE> 99
ARTICLE XV
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person, with written acknowledgment received, or
mailed by certified mail, return receipt requested, as follows:
IF TO THE COMPANY: TeamStaff, Inc.
300 Atrium Drive
Somerset, NJ 08873
IF TO THE EMPLOYEE: Donald T. Kelly
458 Fairmont Avenue
Chatham, NJ 07928
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph. Notice shall be effective
three (3) days after delivery or mailing.
ARTICLE XVI
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and personal
representatives of the Employee.
ARTICLE XVII
WAIVER
The waiver by either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of construction and validity.
<PAGE> 100
ARTICLE XVIII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of
Florida shall govern its construction and validity.
ARTICLE XIX
JURISDICTION
Any or all actions or proceedings which may be brought by the Company
or Employee under this Agreement shall be brought in courts having a situs
within the State of New Jersey, and Employee and the Company each hereby
consent to the jurisdiction of any local, state, or federal court located
within the State of New Jersey.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition, or amendment shall be made hereto, except by
written agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and affixed their hands and seals the day and year first above written.
(Corporate Seal) TEAMSTAFF, INC.
By:/s/ DONALD T. KAPPAUF
-----------------------------
Donald W. Kappauf
[SEAL] President and Chief Executive Officer
/s/ DONALD T. KELLY
-----------------------------------
Donald T. Kelly
Employee
<PAGE> 101
Schedule A
(A) For the fiscal year ended September 30, 2000, Employee shall be
entitled to be paid as a Bonus a percentage of the net pre-tax profit of the
Company as determined by the Company's independent auditors no later than 75
days following the end of the Company's fiscal year without giving effect to
tax loss carry forwards or the payment of any bonus under the Company's
Executive Officer Bonus Program (the "EBT") as follows: (1) if EBT is at least
$3,115,380 but less than $3,894,225, a percentage of EBT determined as follows:
(a) the sum of 2% plus the percentage equal to the amount of EBT earned in
excess of $3,115,000 divided by 778,845 and multiplied by 2; (2) if EBT is at
least $3,894,225 but less than $5,062,500, a percentage EBT determined as
follows: (a) the sum of 3% plus the percentage equal to the amount of EBT
earned in excess of $3,894,225 divided by 1,168,275 and multiplied by 2; and
(3) if EBT is equal to or in excess of $5,062,500, 4% of EBT; provided that in
the event EBT is less than $3,115,380 no bonus shall be paid by the Company to
the Employee other than at the discretion of the Compensation Committee. Such
determination, for Bonus purposes only, shall be made in accordance with
generally accepted accounting principles, as modified by this Schedule A.
(B) In the event the Company consummates a divestiture (a
"Divestiture") of a subsidiary or business unit, the EBT required for each
percentage level of Bonus shall be proportionately adjusted downward based on
the Company's profit plan projections to reflect the loss of EBT for the
remainder of the fiscal year attributable to the divested business unit or
subsidiary. A Divestiture does not include a transaction involving the sale of
all or substantially all of the assets of the Company.
