FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
(X) THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number - 1-9477
JOULE INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2735672
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 U.S. Route 1 South, Edison, New Jersey 08837
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 732-548-5444
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par
value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on the American
Stock Exchange on December 21, 1999, was approximately $ 2,034,000.
As of December 21, 1999, there were 3,674,000 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Company's Annual Report to Stockholders for the fiscal
year ended September 30, 1999 filed with the Securities and Exchange Commission
(The "Commission") pursuant to Rule 14a-3 under the Securities Exchange Act of
1934 (the "1999 Annual Report"), are incorporated by reference in Part II, Items
5-8, and Part IV of this Annual Report on Form 10-K.
Certain portions of the Company's Proxy Statement to be filed with the
Commission pursuant to Rule 14a-6 under the Securities Exchange Act of 1934 in
connection with the Company's 2000 Annual Meeting of Stockholders (the "Proxy
Statement") are incorporated by reference in Part III, Items 10-13, of this
Annual Report on Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Joule Inc. and its subsidiaries are engaged in the business of personnel
outsourcing, as a supplier to industry of staffing service personnel. These
services focus on supplying commercial (skilled office and light industrial)
workers, technical professionals, and skilled craft industrial plant and
facility maintenance personnel to business and industry on a temporary basis.
All employees on assignment to the Company's clients are on the Company's
payroll only during the periods of their assignments. By prior understanding,
their employment is continued after completion of an assignment only if another
suitable assignment is available. Historically, approximately 95% of revenue is
billed based on direct cost plus a mark-up to cover the Company's overhead and
profit. At September 30, 1999, approximately 2400 employees were on assignment
to approximately 450 clients for periods ranging in duration from one day to
several years.
In May 1999, the Company completed the acquisition of the principal
operating assets (excluding cash and receivables) of Ideal Technical Services
("Ideal"), a staffing company specializing in engineering and other technical
services, for $1.3 million. Ideal, which has offices in Mobile, Alabama and
Houston, Texas, had been a subsidiary of SkillMaster, Inc. of Houston, Texas.
This acquisition substantially increased the size and geographic coverage of the
Company's technical staffing operations.
The Company was incorporated in New Jersey in 1967 as the successor to a
business organized in 1965 and was reincorporated in Delaware on July 28, 1986.
Description of Services
The Company supplies commercial (skilled office and light industrial
workers) to business and industry. The office workers are comprised of word
processing, data entry, consumer service and other office service personnel.
Light industrial workers may work in warehouse, packaging or light assembly
environments. Recruitment and assignment of such personnel is conducted through
fourteen offices in New Jersey, Delaware, Maryland and Florida. The assignments
last from one day to several months or longer. Assignments are sometimes made to
fill vacancies in a client's work force caused by vacations, illnesses,
terminations or reassignments of the clients full-time employees and, in other
cases to supplement the clients normal work force to meet peak work loads,
handle special projects or provide special expertise. Often clients elect to
staff a portion of their service requirements on a longer term basis with
personnel employed and provided by the Company. The client is charged an hourly
rate that comprises the direct labor rate of the personnel provided, associated
costs (such as fringe benefits and payroll taxes) and a mark-up to cover the
Company's overhead and profit. In 1998, the Company initiated a van
transportation program to transport some of its commercial staffing workers to
job sites. Employees who use this service, which is voluntary, pay a daily fee
which currently partially offsets the cost of the program. During 1999, the
number of office and light industrial workers on assignment per week averaged
1600, and such services contributed approximately 38%, 37% and 38% of revenues
in 1999, 1998 and 1997, respectively.
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The Company's technical employees include engineers, designers, draftsmen,
information technology personnel, scientists and lab technicians, who are often
furnished on a project basis. Recruitment and assignment of these personnel are
conducted from Edison, New Jersey and, since the acquisition of Ideal, from
Mobile, Alabama and Houston, Texas. A client that has an in-house engineering or
other technical department, such as a laboratory, is able to supplement its
permanent staff in a particular skill or for a specific project by utilizing
personnel provided by the Company to implement the clients designs or program.
Generally, several candidates are interviewed by the client before an assignment
is made. The work is performed at the client's facility under the client's
supervision. The Company is neither an independent consultant nor professionally
liable. The client is charged at an hourly rate that comprises the direct labor
rate of the personnel provided, associated costs (such as fringe benefits and
payroll taxes) and a mark-up to cover the Company's overhead and profit. There
are many technical personnel who choose to work on temporary assignments rather
than hold permanent positions because of the opportunity to work on diverse
projects and to choose times of employment. While they are not guaranteed steady
employment, are not eligible for promotion and receive lesser fringe benefits
than their full-time counterparts, such persons frequently are compensated at
higher rates than full-time, permanent personnel with similar backgrounds and
experience and have a greater opportunity for overtime compensation. During
1999, the number of technical workers on assignment per week averaged nearly
400, and such services contributed approximately 30%, 30% and 27% of revenues in
1999, 1998 and 1997, respectively.
The Company also provides skilled craft industrial plant and facility
maintenance labor services at oil refineries, utilities, chemical,
pharmaceutical and industrial plants, and office buildings. These assignments
often encompass responsibility for performance of discrete functions for
customers on an ongoing basis. Recruitment and assignment of such personnel is
done from offices in New Jersey, Maryland, New York, and Illinois. The Company
provides the services of welders, electricians, millwrights, insulators,
pipefitters and other tradesmen as well as the necessary supervisory personnel
and certain materials and equipment. The Company may furnish a base crew of
tradesmen that is assigned to the clients facility on a full-time basis that can
be supplemented as needed to provide additional services requested by the
client. The Company also undertakes specific projects, such as oil and chemical
plant repairs, shutdowns, dismantling, and relocation and re-assembly of plant
equipment. It also sends crews throughout the United States to install original
equipment for manufacturers. The Company generally charges clients at hourly
rates, which include a mark up for overhead and profit, for the different
classifications of tradesmen and supervisory personnel and on a cost-plus basis
for materials and equipment. Travel expenses are also billed to customers when
appropriate. During 1999, the average number of such skilled industrial service
personnel on assignment per week to clients was nearly 300. Historically, a
substantial percentage of industrial services contracts are renewed. Skilled
industrial services contributed approximately 32%, 33% and 35% of revenues in
fiscal 1999, 1998 and 1997, respectively.
The use by clients of staffing services personnel provided by the Company
allows them to hire only such permanent employees as are required for their
regular core work loads. Clients are thus able to shift to the Company the cost
and inconvenience associated with the employment of non-core personnel,
including advertising, interviewing, screening, testing, training, fringe
benefits, record keeping, payroll taxes and insurance. The Company is able to
absorb such costs more effectively than its clients because its employees, once
recruited, are generally assigned to a succession of positions with different
clients.
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Customers and Marketing
A significant portion of the Company's business represents repeat orders.
For fiscal 1999 over 70% of the Company's revenues were derived from assignments
to clients with which the Company had done business for more than two years.
The Company markets its services primarily through sales calls by its own
sales personnel and through direct mail solicitation, participation in trade
exhibitions and advertising. No customer accounted for more than 10% of revenues
in 1999, 1998 or 1997.
Personnel Assignment and Recruitment
The Company maintains a computerized data base of information on potential
employees. It uses optical scanning equipment, where appropriate, to enhance its
resume' data base retrieval system. The data base contains information on office
services and light industrial personnel, engineering and other technical and
scientific personnel, and skilled industrial personnel, classified by skill,
residence, experience and current availability for assignment. When called upon
to fill an assignment, the Company's recruiting specialists match the client's
specifications with the information in the data base on these potential
employees. The ability to update, expand and rapidly access the data base is
important to the Company's success. The Company's branch offices have direct,
on-line access to the data base. Direct access is especially important in the
office services and technical areas where immediate response to client orders is
required. In addition, it is important in the technical services operation
because of the diversity of skills involved.
The Company recruits personnel through advertisements in local media and
trade journals, at job fairs, and through referrals by current and past
employees. Personnel listed in the Company's data base generally do not work
exclusively for the Company. Compensation and location of the assignment are the
principal factors considered by such personnel when choosing from competing
assignments. The Company considers its pay scale to be competitive.
Competition
The Company faces intense competition from a large number of local and
regional firms as well as national firms. The Company competes with these firms
for potential employees as well as for clients. Many of the regional firms and
all of the national firms with which it competes are substantially larger and
possess substantially greater operating, financial and personnel resources than
the Company. The Company competes primarily on the basis of price, quality and
reliability of service.
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Employees
At September 30, 1999, the Company employed approximately 180 full and
part-time permanent employees in its headquarters and branch offices other than
those on assignment to clients and had approximately 2400 persons on assignment.
The Company is a party to collective bargaining agreements covering
approximately 200 employees engaged in skilled craft industrial and facility
maintenance work. The Company considers its relationships with its employees to
be satisfactory.
ITEM 2. PROPERTIES
The Company leases most of its facilities. The Company's corporate
headquarters are located in Edison, New Jersey and comprise approximately 8,000
square feet. The Company owns that building and also owns a building adjacent to
its corporate headquarters which serves as operational headquarters for one of
the Company's divisions. These buildings are linked to other offices by computer
network and communications equipment. Three facilities are leased from Emanuel
N. Logothetis, the Chairman of the Board of the Company, at an aggregate annual
rent of approximately $50,000, plus applicable real estate taxes, under terms
and conditions that, in the opinion of management, are not less favorable than
would have been available from unaffiliated parties. The Company entered into a
three year lease with the purchaser of property formerly owned by an affiliate
in 1997. Annual rentals under this lease approximate $133,000. The Company
subleases most of this space to the affiliate which reimburses the Company
approximately $115,000 annually. Sixteen additional facilities, comprising
approximately 40,000 square feet of space, are leased from unaffiliated parties
at rentals and under terms and conditions prevailing in the various locations.
The Company's facilities are appropriate and adequate for its current needs.
ITEM 3. LEGAL PROCEEDINGS
In the opinion of management, there are no material pending legal
proceedings to which the Company is a party or of which any of its property is
the subject. In October 1998, the Company decided to settle a lawsuit. While the
Company felt that the case was without merit, it settled to contain legal
expenses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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Executive Officers of the Company
The names, ages and positions of all of the executive officers of the
Company as of December 21, 1999 are listed below along with their business
experience during the past five years. Officers are elected annually by the
Board of Directors and serve at the pleasure of the Board. There are no
arrangements or understandings between any officer and any other person pursuant
to which the officer was selected. Emanuel N. Logothetis and John Logothetis are
second cousins.
Emanuel N. Logothetis, age 69, founded the Company in 1965 and was
President and Chief Executive Officer until August 10, 1987, when he was elected
Chairman of the Board. He was reelected President on August 3, 1988. In
February, 1999 he relinquished the Presidency but was reelected Chairman of the
Board.
John G. Wellman, Jr., age 51, was elected President and Chief Operating
Officer in February, 1999. He was elected Executive Vice President and Chief
Operating Officer on May 6, 1998. He was appointed to the same positions when he
joined the Company in March, 1998. Prior to that he was Executive Vice President
of Oxford and Associates, Inc., a technical staffing firm, from 1986 through
March, 1998.
Bernard G. Clarkin, age 50, was elected Vice President in February 1994 and
Chief Financial Officer, Treasurer, and Secretary in February 1990. He was
Controller, Treasurer and Secretary of the Company from February 1989 until
February 1990.
John Logothetis, age 46, was elected a Vice President on July 1, 1986. He
had been General Manager of the Facilities Maintenance Operation since June 1984
and prior thereto had been Manager of Supplemental Services since joining the
Company in December 1976.
Stephen Demanovich, age 45, was elected a Vice President in May, 1997. He
had been General Manager of Joule Technical Staffing since March, 1995 and prior
thereto had been Recruiting Manager since joining the Company in February, 1989.
Anthony Trotter, age 42, was elected a Vice President on February 4, 1998.
He was appointed Vice President in August, 1997 when he joined the Company.
Prior to that he was employed as Vice President of Staff Management Services
from October, 1995 through July, 1997. He was Vice President of Best Temporaries
from December, 1994 through September, 1995. Prior to that he was an Area
Manager for Novell Services, Inc. from March, 1992 through August, 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to the
information under the caption "Stock Market Information" on inside back cover of
the 1999 Annual Report.
6
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ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to the
"Selected Financial Information", included on the inside front cover of the 1999
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to the
information under the same caption on page 6 of the 1999 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to the
Consolidated Financial Statements appearing on pages 7 to 12 of the 1999 Annual
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to the directors of the Company required to be
included pursuant to this Item 10 will be included under the caption "Election
of Directors - Director Compensation" in the Company's Proxy Statement, and is
incorporated in this Item 10 by reference. The information with respect to the
executive officers of the Company required to be included pursuant to this Item
10 is included under the caption "Executive Officers of the Company" in Part I
of this Annual Report on Form 10-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the Common
Stock, to file reports of
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ownership and changes in ownership of the Common Stock with the Securities and
Exchange Commission and to provide copies to the Company. Based upon a review of
the copies of the forms furnished to the Company and upon written
representations from certain reporting persons that no forms were required, the
Company believes that all Section 16(a) filing requirements were complied with
during fiscal 1999 other than the late filing by Mr. Wellman of Forms 4 to
report four transactions relating to the acquisition of an aggregate of 1,200
shares of Common Stock and the disposition of 350 shares of Common Stock by a
trust for the benefit of his minor children of which he is the trustee.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation required to be
included pursuant to this Item 11 will be included under the caption
"Compensation of Executive Officers-Certain Transactions" in the Proxy Statement
and is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial owners
and management that is required to be included pursuant to this Item 12 will be
included under the captions "Beneficial Ownership of More than 5% of the
Outstanding Common Stock" and "Beneficial Ownership of Management" in the Proxy
Statement and is incorporated in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to any reportable transaction, business
relationship or indebtedness between the Company and the beneficial owners of
more than 5% of the Common Stock, the directors or nominees for director of the
Company, the executive officers of the Company or the members of the immediate
families of such individuals that is required to be included pursuant to this
Item 13 will be included under the caption "Compensation of Executive
Officers-Certain Transactions" in the Proxy Statement and is incorporated in
this Item 13 by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
The following Financial Statements of JOULE Inc. and subsidiaries and
Report of Independent Public Accountants are incorporated in Part IV by
reference to the 1999 Annual Report.
Report of Independent Public Accountants with respect to the financial
statements for the fiscal years, 1999, 1998 and 1997, respectively.
Consolidated Balance Sheets as of September 30, 1999 and 1998,
respectively.
8
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Consolidated Statements of Income for the Years Ended September 30,
1999, 1998 and 1997, respectively.
Consolidated Statements of Changes in Stockholders Equity for the
Years Ended September 30, 1999, 1998 and 1997, respectively.
Consolidated Statements of Changes in Cash Flows for the Years Ended
September 30, 1999, 1998 and 1997, respectively.
Notes to Consolidated Financial Statements.
The following financial statement schedules are included at the indicated
page in this Annual Report on Form 10-K and incorporated in this Item 14(a)
by reference:
Report of Independent Public Accountants as to
Schedules...........................................F-1
Financial Statement Schedules:
VIII - Valuation and Qualifying
Accounts............................................F-2
IX - Short-term
Borrowings..........................................F-3
All other schedules are omitted since they are not required or are not
applicable or since the information is furnished elsewhere in the financial
statements or notes thereto.
(b) Reports on Form 8-K
Form 8-K dated May 20, 1999 with respect to the acquisition of the
principal operating assets of Ideal (the "initial 8-K") pursuant to item 2.
Form 8-K/A dated August 2, 1999 which amends the initial 8-K to include the
following financial information pursuant to item 7:
(a) Financial statements of Ideal
o Balance Sheet as of December 31, 1998
o Statement of Operations and Accumulated Deficit for the year
ended December 31, 1998
o Statement of Cash Flows for the year ended December 31, 1998
o Notes to Financial Statements - December 31, 1998
(b) Pro Forma financial information
o Pro Forma Condensed Balance Sheet as of March 31, 1999
o Related Pro Forma Statements of Income for the year ended
September 30, 1998 and the six months ended March 31, 1999
o Notes to the Unaudited Pro Forma Condensed Financial Statements
9
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(c) Exhibits
3.1 --Certificate of Incorporation, filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No. 33-7617)
under the Securities Act of 1933, as amended (the "Form S-1"), and
incorporated herein by reference.
3.2 --By-laws, as amended, filed as Exhibit 3.2 to the Form S-1 and
incorporated herein by reference.
4.1 --Loan and Security Agreement, dated as of February 20, 1991,
between Registrant and United Jersey Bank Central, N.A., filed as
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1991 and incorporated herein by
reference.
4.1a --Third Modification and Extension Agreement, dated August 23, 1995,
between Registrant and United Jersey Bank, filed as Exhibit 4.1a
to the Company's Annual Report on Form 10-k for the year ended
September 30, 1995 and incorporated herein by reference.
4.1b --Fourth Modification and Extension Agreement dated February 6, 1996
between Registrant and United Jersey Bank, filed as Exhibit 4.1b
to the Company's Annual Report on form 10-K for the year ended
September 30, 1996 and incorporated herein by reference.
4.1c --Fifth Modification and Extension Agreement dated May 31, 1996
between Registrant and United Jersey Bank, filed as Exhibit 4.1c
to the Company's Annual Report on form 10-K for the year ended
September 30, 1996 and incorporated herein by reference.
4.1d --Sixth Modification and Extension Agreement dated May 31, 1997
between Registrant and Summit Bank, filed as Exhibit 4.1d to the
Company's Annual Report on form 10-K for the year ended September
30, 1997 and incorporated herein by reference.
4.1e --Seventh Modification and Extension Agreement dated May 31, 1998
between registrant and Summit bank, filed as Exhibit 4.1e to the
Company's Annual Report on form 10-K for the year ended September
30, 1998 and incorporated herein by reference
4.1f --Eighth Modification and Extension Agreement dated February 5, 1999
between registrant and Summit bank.
4.1g --Ninth Modification and Extension Agreement dated May 10, 1999
between registrant and Summit Bank.
The Company hereby agrees to furnish to the Commission upon its
request any instrument defining the rights of holders of long-term
debt of the Company and its consolidated subsidiaries and for any
of its unconsolidated subsidiaries for which
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financial statements are required to be filed with respect to
long-term debt which does not exceed 10 percent of the total
assets of the registrant and its subsidiaries on a consolidated
basis.
10.1 --Lease Agreement, dated April 1, 1986, between Registrant and
Emanuel N. Logothetis for premises at 362 Parsippany Road,
Parsippany, New Jersey, filed as Exhibit 10.5 to the Form S-1 and
incorporated herein by reference.
10.2 --Lease Agreement, dated January 1, 1987, between Registrant and E.
N. Logothetis for Unit G, Mercerville Professional Park
Condominiums, 2333 Whitehorse - Mercerville Road, Hamilton
Township, New Jersey, filed as Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended September 25, 1987
and incorporated herein by reference.
10.3*--1988 Non-qualified Stock Option Plan, filed as Exhibit 10.13 to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1991 and incorporated herein by reference.
10.4*--1991 Stock Option Plan, filed as Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1991
and incorporated herein by reference.
13 --Annual Report to Stockholders for the year ended September 30,
1999.
21 --List of Subsidiaries.
23 --Consent of Independent Public Accountants
27 --Financial Data Schedule (in EDGAR filing only)
- ----------
* Compensatory Plan
11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JOULE INC.
Dated: December 28, 1999 Emanuel N. Logothetis
---------------------
Emanuel N. Logothetis,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on December 28, 1999.
Emanuel N. Logothetis Bernard G. Clarkin
- ---------------------- ------------------
Emanuel N. Logothetis Bernard G. Clarkin
Chairman of the Board and Vice President and Chief Financial
Director (Principal Executive Officer (Principal Financial Officer and
Officer) and Accounting Officer)
Nick M. Logothetis
- ---------------------- ------------------
Nick M. Logothetis - Director Steven Logothetis - Director
Richard Barnitt Paul De Bacco
- ---------------------- ------------------
Richard Barnitt- Director Paul DeBacco - Director
- ----------------------
Robert W. Howard - Director
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Joule Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Joule Inc. and subsidiaries annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated November 12, 1999. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedules listed in
the index above are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
November 12, 1999
F-1
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SCHEDULE VIII
JOULE INC. AND SUBSIDIARIES
VALUATION AND QUALIFICATION ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
BALANCE CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- --------- -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts:
Years Ended:
September 30, 1997 $217,000 $ 87,000 -- $104,000 $200,000
September 30, 1998 $200,000 $ 93,000 -- $ 26,000 $267,000
September 30, 1999 $267,000 $778,000 -- $661,000 $384,000
</TABLE>
F-2
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SCHEDULE IX
JOULE INC AND SUBSIDIARIES
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE WEIGHTED
CATEGORY OF AVERAGE AMOUNT AMOUNT AVERAGE
AGGREGATE INTEREST RATE OF BORROWINGS OUTSTANDING INTEREST RATE
SHORT-TERM BALANCE AT AT END DURING DURING DURING THE
BORROWINGS END OF YEAR OF YEAR THE YEAR THE YEAR* YEAR*
---------- ----------- ------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
YEARS ENDED
SEPTEMBER 30, 1997 BANKS $1,295,000 7.75% $2,743,000 $2,070,000 7.83%
SEPTEMBER 30, 1998 BANKS $3,100,000 7.16% $3,271,000 $2,538,000 7.80%
SEPTEMBER 30, 1999 BANKS $7,700,000 6.94% $8,200,000 $4,833,000 6.82%
</TABLE>
*Average amount outstanding is based on daily averages. Weighted
average interest rate during each year is calculated by dividing
interest expense on short term borrowings by the average amount
outstanding.
F-3
<PAGE>
Exhibit
Number Page
EXHIBIT INDEX
Description of Exhibit
----------------------
3.1 Certificate of Incorporation, filed as *
Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (File No. 33-7617)
under the Securities Act of 1933, as amended
(the "Form S-1"), and incorporated herein by
reference.
3.2 By-laws, as amended, filed as Exhibit 3.2 to *
the Form S-1 and incorporated herein by
reference.
4.1 Loan and Security Agreement, dated as of *
February 20, 1991, between Registrant and
United Jersey Bank Central, N.A., filed as
Exhibit 4.1 to the Company's Annual Report on
Form 10-K for the year ended September 30,
1991 and incorporated herein by reference.
4.1a Third Modification and Extension Agreement, *
dated August 23, 1995, between Registrant and
United Jersey Bank, filed as Exhibit 4.1a to
the Company's Annual Report on Form 10-K for
the year ended September 30, 1995 and
incorporated herein by reference.
4.1b Fourth Modification and Extension Agreement *
dated February 6, 1996 between Registrant and
United Jersey Bank, filed as Exhibit 4.1b to
the Company's Annual Report on form 10-K for
the year ended September 30, 1996 and
incorporated herein by reference.
4.1c Fifth Modification and Extension Agreement *
dated May 31, 1996 between Registrant and
United Jersey Bank, filed as Exhibit 4.1c to
the Company's Annual Report on form 10-K for
the year ended September 30, 1996 and
incorporated herein by reference.
4.1d Sixth Modification and Extension Agreement *
dated May 31, 1997 between Registrant and
Summit Bank, filed as Exhibit 4.1d to the
Company's Annual Report on form 10-K for the
year ended September 30, 1997 and
incorporated herein by reference.
<PAGE>
4.1e Seventh Modification and Extension *
Agreement dated May 31, 1998, between
registrant and Summit bank, filed as
Exhibit 4.1e to the Company's Annual
Report on form 10-K for the year ended
September 30, 1998 and incorporated
herein by reference.
4.1f Eighth Modification and Extension 19
Agreement dated February 5, 1999 between
registrant and Summit Bank.
4.1g Ninth Modification and Extension 38
Agreement dated May 10, 1999 between
registrant and Summit Bank
The Company hereby agrees to furnish to
the Commission upon its request any
instrument defining the rights of
holders of long-term debt of the Company
and its consolidated subsidiaries and
for any of its unconsolidated
subsidiaries for which financial
statements are required to be filed with
respect to long-term debt which does not
exceed 10 percent of the total assets of
the registrant and its subsidiaries on a
consolidated basis.
10.1 Lease Agreement, dated April 1, 1986, *
between Registrant and Emanuel N.
Logothetis for premises at 362
Parsippany Road, Parsippany, New Jersey,
filed as Exhibit 10.5 to the Form S-1
and incorporated herein by reference.
10.2 Lease Agreement, dated January 1, 1987, *
between Registrant and E.N. Logothetis
for Unit G, Mercerville Professional
Park Condominiums, 2333 Whitehorse -
Mercerville Road, Hamilton Township, New
Jersey, filed as Exhibit 10.12 to the
Company's Annual Report on Form 10-K for
the year ended September 25, 1987 and
incorporated herein by reference.
10.3** 1988 Non-qualified Stock Option Plan, *
filed as Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the year
ended September 30, 1991 and
incorporated herein by reference.
10.4** 1991 Stock Option Plan, filed as Exhibit *
10.11 to the Company's Annual Report on
Form 10-K for the year ended September
30, 1991 and incorporated herein by
reference.
13 Annual Report to Stockholders for the 56
year ended September 30, 1999.
<PAGE>
21 List of Subsidiaries 73
23 Consent of Independent Public Accountants 75
27 Financial Data Schedule ( in EDGAR Filing only)
* Incorporated by Reference
** Compensatory Plan
================================================================================
EIGHTH AMENDMENT AND MODIFICATION AGREEMENT
by and among
JOULE, INC.,
as the Borrower
and
JOULE MAINTENANCE CORPORATION,
JOULE TECHNICAL SERVICES, INC. and
JOULE TECHNICAL STAFFING, INC.,
collectively as the Corporate Guarantors
and
SUMMIT BANK,
as the Lender
Dated: February 5th, 1999
- --------------------------------------------------------------------------------
<PAGE>
EIGHTH AMENDMENT AND MODIFICATION AGREEMENT
THIS EIGHTH AMENDMENT AND MODIFICATION AGREEMENT (hereinafter as it may be
from time to time amended, modified, extended, renewed, refinanced and/or
supplemented referred to as this "Eighth Modification Agreement"), is made this
5th day of February, 1999, by and among
JOULE, INC., a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, having its principal executive
office located at 1245 Route 1 South, Edison, New Jersey 08837 (hereinafter
referred to as the "Borrower"),
AND
JOULE MAINTENANCE CORPORATION, a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, having
its principal executive office located at 1245 Route 1 South, Edison, New Jersey
08837 (hereinafter referred to as "Joule Maintenance Corporation"),
AND
JOULE TECHNICAL SERVICES, INC., as successor-in-interest pursuant to the
merger of JOULE ENGINEERING CORP., JOULE TEMPORARIES CORPORATION, JOULE
MAINTENANCE OF MARYLAND, INC., JOULE TECHNICAL CORPORATION, JOULE MAINTENANCE OF
GIBBSTOWN, INC., JOULE MAINTENANCE OF NEW YORK, INC. AND TIGER MAINTENANCE, a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey, having its principal executive office located at
1245 Route 1 South, Edison, New Jersey 08837 (hereinafter referred to as "Joule
Technical Services, Inc."),
AND
JOULE TECHNICAL STAFFING, INC., a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, having
its principal executive office located at 1245 Route 1 South, Edison, New Jersey
08837 (hereinafter referred to as "Joule Technical Staffing, Inc." and
hereinafter Joule Maintenance Corporation, Joule Technical Services, Inc. and
Joule Technical Staffing, Inc. shall be collectively be referred to as the
"Corporate Guarantors"),
AND
SUMMIT BANK, as successor-in-interest to UNITED JERSEY BANK, having an
office located at 210 Main Street, Hackensack, New Jersey 07601, being a banking
institution duly organized and validly existing under the laws of the State of
New Jersey (hereinafter referred to as the "Lender").
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<PAGE>
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on or about February 20, 1991, the Borrower requested and the
Lender agreed to make a revolving credit loan in the aggregate principal amount
of up to Four Million and 00/100 ($4,000,000.00) Dollars for the purposes of (i)
refinancing certain of the Borrower's then existing indebtedness to First
Fidelity Bank, National Association and (ii) financing the general working
capital requirements of the Borrower (hereinafter as it may be from time to time
amended, modified, extended, renewed, refinanced and/or supplemented referred to
as the "Revolving Credit Loan"), all as more fully provided for in that certain
Loan and Security Agreement dated February 20, 1991, executed by and between the
Borrower and the Lender (hereinafter as it may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented referred to as the
"Loan Agreement"); and
WHEREAS, the Revolving Credit Loan is evidenced by a certain Revolving Note
dated February 20, 1991, executed by the Borrower, as the maker, and delivered
to the Lender, as the payee, in the original aggregate principal amount of the
Revolving Credit Loan (hereinafter as it may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented referred to as the
"Revolving Note"); and
WHEREAS, pursuant to the terms, conditions and provisions of the Loan
Agreement, the Borrower, Joule Maintenance Corporation, Joule Maintenance of
Gibbstown, Inc. (hereinafter referred to as "Joule Maintenance of Gibbstown,
Inc."), Joule Engineering Corp. (hereinafter referred to as "Joule Engineering
Corp."), Joule Engineering of California, Inc. (hereinafter referred to as
"Joule Engineering of California, Inc."), Joule Technical Corporation
(hereinafter referred to as "Joule Technical Corporation"), Joule Temporaries
Corporation (hereinafter referred to as "Joule Temporaries Corporation"), Joule
Maintenance of New York, Inc. (hereinafter referred to as "Joule Maintenance of
New York, Inc."), Joule Maintenance of Maryland, Inc. (hereinafter referred to
as "Joule Maintenance of Maryland, Inc."), Joule Engineering of Pennsylvania,
Inc. (hereinafter referred to as "Joule Engineering of Pennsylvania, Inc."),
Joule Constructors, Inc. (hereinafter referred to as "Joule Constructors,
Inc."), Joule Temporaries of Edison, Inc. (hereinafter referred to as "Joule
Temporaries of Edison, Inc."), Joule Temporaries of Parsippany, Inc.
(hereinafter referred to as "Joule Temporaries of Parsippany, Inc."), Joule
Operating Services, Inc. (hereinafter referred to as "Joule Operating Services,
Inc."), Tiger Maintenance, Inc. (hereinafter referred to as "Tiger Maintenance,
Inc.") and Joule Maintenance of Bayonne, Inc. (hereinafter referred to as "Joule
Maintenance of Bayonne, Inc." and hereinafter Joule Maintenance Corporation,
Joule Maintenance of Gibbstown, Inc., Joule Engineering Corp., Joule Engineering
of California, Inc., Joule Technical Corporation, Joule Temporaries Corporation,
Joule Maintenance of New York, Inc., Joule Maintenance of Maryland, Inc., Joule
Engineering of Pennsylvania, Inc., Joule Constructors, Inc., Joule Temporaries
of Edison, Inc., Joule Temporaries of Parsippany, Inc., Joule Operating
Services, Inc., Tiger Maintenance, Inc., and Joule Maintenance of Bayonne, Inc.
shall be collectively referred to as the "Original Corporate Guarantors")
granted to the Lender a valid first lien security interest in and to certain
Collateral, as more fully and accurately described in the Loan Agreement; and
2
<PAGE>
WHEREAS, as of February 20, 1991, Emanuel N. Logothetis, as the guarantor
(hereinafter referred to as the "Individual Guarantor"), executed and delivered
to the Lender, as the lender, a certain Individual Guaranty, pursuant to which
the Individual Guarantor agreed to guaranty the full, prompt and unconditional
payment of when due of any and all present and future obligations or liabilities
of any kind of the Borrower owing to the Lender, including, without limitation,
the repayment in full of the Revolving Credit Loan (hereinafter as it may be
from time to time amended, modified, extended, renewed, refinanced and/or
supplemented referred to as the "Individual Guaranty"); and
WHEREAS, as of February 20, 1991, each Original Corporate Guarantor, each
as a guarantor, executed and delivered to the Lender, as the lender, a separate
Corporate Guaranty, pursuant to which each Original Corporate Guarantor agreed
to guaranty the full, prompt and unconditional payment of when due of any and
all present and future obligations or liabilities of any kind of the Borrower
owing to the Lender, including, without limitation, the repayment in full of the
Revolving Credit Loan (hereinafter as each may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented collectively
referred to as the "Corporate Guaranty"); and
WHEREAS, on January 17, 1991, the Borrower, as the assignor, delivered to
the Lender, as the assignee, a certain Assignment of Life Insurance Policy as
Collateral with respect to that certain life insurance policy no. U01426631
issued by the Hartford Insurance Company upon the life of the Individual
Guarantor (hereinafter as it may be from time to time amended, modified,
extended, renewed, refinanced and/or supplemented referred to as the "Assignment
#1"), as collateral security for the Borrower's obligations under the Loan
Agreement; and
WHEREAS, on February 20, 1991, Joule Maintenance Corporation, as
successor-in-interest to Joule Maintenance Corp., as the assignor, executed and
delivered to the Lender, as the assignee, a certain Collateral Assignment of
Contract Proceeds with respect to that certain contract between Joule
Maintenance Corporation and the United States Government identified as Contract
No. DAHC21-85-C-0021 (hereinafter as it may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented referred to as the
"Assignment #2"), as collateral security for the repayment of the liabilities
and obligations of Joule Maintenance Corporation to the Lender under the Loan
Agreement and under the Corporate Guaranty; and
WHEREAS, on September 1, 1991, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Promissory Note for the purpose
of extending the term of the Revolving Credit Loan from the then current
maturity date of "September 1, 1991", to a new maturity date of "January 15,
1992" (hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#1"); and
WHEREAS, on January 15, 1992, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Master Advance Note for the
purpose of extending the term of the Revolving Credit Loan from the then current
maturity date of "January 15, 1992" to a new
3
<PAGE>
maturity date of "January 31, 1993" (hereinafter as it may be from time to time
amended, modified, extended, renewed, refinanced and/or supplemented referred to
as the "Extension Agreement #2"); and
WHEREAS, on January 31, 1993, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Master Advance Note for the
purpose of extending the term of the Revolving Credit Loan from the then current
maturity date of "January 31, 1993" to a new maturity date of "January 31, 1994"
(hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#3"); and
WHEREAS, on January 31, 1994, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Master Advance Note for the
purpose of extending the term of the Revolving Credit Loan from the then current
maturity date of "January 31, 1994" to a new maturity date of "March 31, 1994"
(hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#4"); and
WHEREAS, on March 31, 1994, the Borrower, the Original Corporate
Guarantors, the Individual Guarantor and the Lender entered into a certain First
Modification and Extension Agreement for the purposes of (i) in Article I,
Section 1.1 of the Loan Agreement, extending the Termination Date of the
Revolving Note from the then current Termination Date of "March 31, 1994" to a
new Termination Date of "January 31, 1995"; (ii) amending and modifying the
Lender's address from the old address of "630 Franklin Boulevard, Somerset, New
Jersey 08875" to "4365 Route 1 South, Princeton, New Jersey 08540"; (iii)
providing for a mutual waiver of jury trial; and (iv) providing for semi-annual
audits of Collateral (hereinafter referred to as the "First Modification
Agreement"); and
WHEREAS, on March 31, 1994, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain First Allonge to $4,000,000.00
Revolving Note for the purposes of (i) extending the maturity date of the
Revolving Note from the then current maturity date of "March 31, 1994" to a new
maturity date of "January 31, 1995" and (ii) amending and modifying the Lender's
address from the old address of "630 Franklin Boulevard, Somerset, New Jersey
08875" to "4365 Route 1 South, Princeton, New Jersey 08540" (hereinafter
referred to as the "First Allonge"); and
WHEREAS, Joule Engineering of California, Inc., Joule Engineering of
Pennsylvania, Inc., Joule Constructors, Inc., Joule Temporaries of Edison, Inc.,
Joule Temporaries of Parsippany, Inc. and Joule Operating Services, Inc. each
had their respective charters revoked and are no longer doing business; and
WHEREAS, as of January 31, 1995, the Borrower, the Original Corporate
Guarantors, the Individual Guarantor and the Lender entered into a certain
Second Modification and Extension Agreement (hereinafter referred to as the
"Second Modification Agreement") for the purposes of (i) in Article I, Section
1.1 of the Loan Agreement, extending the Termination Date
4
<PAGE>
of the Revolving Note from the then current Termination Date of "January 31,
1995" to a new Termination Date of "January 31, 1996"; (ii) in Article II,
Section 2.4 of the Loan Agreement, decreasing the interest rate from the then
existing interest rate of "Base Rate plus one and one-half percent (1.5%) per
annum" to a new interest rate of "Base Rate plus one percent (1.0%) per annum";
(iii) amending and modifying the Lender's audits of Collateral from semi-annual
audits of Collateral to annual audits of Collateral; and (iv) amending and
modifying the Lender's name from the then existing name of "United Jersey
Bank/Central, N.A." to the new name of "United Jersey Bank"; and
WHEREAS, as of January 31, 1995, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Second Allonge to $4,000,000.00
Revolving Note for the purposes of (i) extending the maturity date of the
Revolving Note from the then current maturity date "January 31, 1995" to a new
maturity date of "January 31, 1996"; (ii) decreasing the interest rate from the
then existing interest rate of "Base Rate plus one and one-half percent (1.5%)
per annum" to the new interest rate of "Base Rate plus one percent (1.0%) per
annum"; and (iii) amending and modifying the name of the Lender from the
Lender's existing name of "United Jersey Bank/Central, N.A." to the Lender's new
name of "United Jersey Bank" (hereinafter referred to as the "Second Allonge");
and
WHEREAS, on August 23, 1995, the Borrower, the Original Corporate
Guarantors and the Lender entered into a certain Third Modification and
Extension Agreement (hereinafter referred to as the "Third Modification
Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan
Agreement, increasing the original aggregate principal amount of the Revolving
Credit Loan from the then existing aggregate principal amount of "$4,000,000.00"
to the new increased aggregate principal amount of "$4,500,000.00"; (ii) in
Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of
the Revolving Note from the then current Termination Date of "January 31, 1996"
to a new Termination Date of "May 31, 1996"; (iii) in Article II, Section 2.2 of
the Loan Agreement, providing for the issuance of Letters of Credit; (iv) in
Article V of the Loan Agreement, providing for a new section, Section 5.23,
which provides for the Borrower's Maximum Debt to Tangible Net Worth Ratio of
2.0 -to- 1.0; (v) in Article V of the Loan Agreement, providing for a new
section, Section 5.24, which provides for the Borrower's Maximum Debt Service
Coverage Ratio of 1.5 -to- 1.0; (vi) providing for a release of the Individual
Guarantor from the Individual Guaranty; and (vii) amending and modifying the
Lender's address from the then existing address of "4365 Route 1 South,
Princeton, New Jersey 08540" to a new address of "Raritan Plaza II, Fieldcrest
Avenue, Edison, New Jersey 08837"; and
WHEREAS, on August 23, 1995, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Third Allonge to $4,000,000.00
Revolving Note for the purposes of (i) increasing the original aggregate
principal amount of the Revolving Credit Loan from the then existing aggregate
principal amount of "$4,000,000.00" to a new increased aggregate principal
amount of "4,500,000.00"; (ii) extending the maturity date of the Revolving Note
from the then current maturity date of "January 31, 1996" to a new maturity date
of "May 31, 1996"; and (iii) amending and modifying the Lender's address from
the then existing address of "4365 Route 1 South, Princeton, New Jersey 08540"
to a new address of "Raritan Plaza II,
5
<PAGE>
Fieldcrest Avenue, Edison, New Jersey 08837" (hereinafter referred to as the
"Third Allonge"); and
WHEREAS, Joule Maintenance Corp. and Joule Maintenance of Bayonne, Inc.
were merged and consolidated and Joule Maintenance Corporation is the
successor-in-interest to both companies; and
WHEREAS, on February 6, 1996, the Borrower, the Original Corporate
Guarantors and the Lender entered into a certain Fourth Modification and
Extension Agreement (hereinafter referred to as the "Fourth Modification
Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan
Agreement, providing for the definition of "Borrowing"; (ii) in Article I,
Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar
Affiliate"; (iii) in Article I, Section 1.1 of the Loan Agreement, providing for
the definition of "Eurodollar Interest Period"; (iv) in Article I, Section 1.1
of the Loan Agreement, providing for the definition of "Eurodollar Interest
Payment Date"; (v) in Article I, Section 1.1 of the Loan Agreement, providing
for the definition of "Eurodollar Interest Rate Determination Date"; (vi) in
Article I, Section 1.1 of the Loan Agreement, providing for the definition of
"Eurodollar Portion"; (vii) in Article I, Section 1.1 of the Loan Agreement,
providing for the definition of "Eurodollar Rate"; (viii) in Article I, Section
1.1 of the Loan Agreement, providing of the definition of "Eurodollar Rate
Loans"; (ix) in Article I, Section 1.1 of the Loan Agreement, providing for the
definition of "Eurodollar Rate Taxes"; (x) in Article I, Section 1.1 of the Loan
Agreement, providing for the definition of "Eurodollar Reserve Percentage"; (xi)
in Article I, Section 1.1 of the Loan Agreement, providing for the definition of
"Funding Segment"; (xii) in Article II, Section 2.4 of the Loan Agreement,
deleting the then existing Section 2.4 and inserting a new Section 2.4 which
provides that the Borrower may select an interest rate from the interest rate
options between either (1) the Base Rate option or (2) the Eurodollar Rate
Option; (xiii) in Article II of the Loan Agreement, providing for a new section,
Section 2.11, which provides for the Borrower's payment of an unused commitment
fee; and (xiv) in Article II of the Loan Agreement, providing for a new section,
Section 2.12, which provides for the special provisions governing Eurodollar
Rate Loans; and
WHEREAS, on February 6, 1996, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Fourth Allonge to $4,000,000.00
Revolving Note for the purpose of deleting the then existing Paragraph 2 of the
Revolving Note and inserting a new Paragraph 2 which provides that the interest
rate to be charged on the outstanding aggregate principal amount of the Loan
shall be set forth in Article II, Section 2.4 of the Loan Agreement (hereinafter
referred to as the "Fourth Allonge"); and
WHEREAS, as of May 31, 1996, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Fifth Allonge to $4,000,000.00
Revolving Note for the purpose of extending the maturity date of the Revolving
Note from the then existing maturity date of "May 31, 1996" to a new maturity
date of "May 31, 1997" (hereinafter referred to as the "Fifth Allonge"); and
6
<PAGE>
WHEREAS, as of May 31, 1996, the Borrower, the Original Corporate
Guarantors and the Lender entered into a certain Fifth Modification and
Extension Agreement (hereinafter referred to as the "Fifth Modification
Agreement") for the purpose of, in Article I, Section 1.1 of the Loan Agreement,
extending the Termination Date of the Revolving Note from the then existing
Termination Date of "May 31,1996" to a new Termination Date of "May 31, 1997";
and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Engineering Corp. was merged with Joule Technical Services, Inc.; and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Temporaries Corporation was merged with Joule Technical Services, Inc.; and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Maintenance of Maryland, Inc. was merged with Joule Technical Services, Inc.;
and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Technical Corporation was merged with Joule Technical Services, Inc.; and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Maintenance of Gibbstown, Inc. was merged with Joule Technical Services, Inc.;
and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Maintenance of New York, Inc. was merged with Joule Technical Services, Inc.;
and
WHEREAS, Tiger Maintenance is no longer doing business and its charter has
been revoked; and
WHEREAS, as of May 31, 1997, the Borrower, the Corporate Guarantors and the
Lender entered into a certain Sixth Modification and Extension Agreement
(hereinafter referred to as the "Sixth Modification Agreement"), for the
purposes of (i) in Article I, Section 1.1 of the Loan Agreement, deleting the
then existing definition of "Corporate Guarantors" and inserting a new
definition of "Corporate Guarantors" in its place and stead; (ii) in Article I,
Section 1.1 of the Loan Agreement, extending the Termination Date of the
Revolving Note from the then existing Termination Date of "May 31, 1997" to a
new Termination Date of "May 31,1998"; (iii) in Article V, Section 5.8(d) of the
Loan Agreement providing for the consolidated balance sheet of the Obligors;
(iv) in the Loan Agreement, amending and modifying the Lender's address from the
then existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New
Jersey 08837" to a new address of "210 Main Street, Hackensack, New Jersey
07601"; (v) in the "Loan Documents" (as such term is hereinafter defined),
providing that any and all references to the "Corporate
7
<PAGE>
Guarantors" shall be deemed to refer to the Corporate Guarantors; (vi) in the
Loan Documents, deleting any and all references to the then existing maturity
date of "May 31, 1997" and inserting a new maturity date of "May 31, 1998" in
their place and stead and (vii) in the Loan Documents, amending and modifying
the Lender's address from the then existing address of "Raritan Plaza II,
Fieldcrest Avenue, Edison, New Jersey 08837" to a new address of "210 Main
Street, Hackensack, New Jersey 07601"; and
WHEREAS, as of May 31, 1997, the Borrower as the maker, executed and
delivered to the Lender, as the payee, a certain Sixth Allonge to $4,000,000.00
Revolving Note for the purposes of (i) extending the maturity date of the
Revolving Note from the then existing maturity date of "May 31, 1997" to a new
maturity date of "May 31, 1998" and (ii) amending and modifying the Lender's
address from the then existing address of "Raritan Plaza II, Fieldcrest Avenue,
Edison, New Jersey 08837" to a new address of "210 Main Street, Hackensack, New
Jersey 07601" (hereinafter referred to as the "Sixth Allonge"); and
WHEREAS, as of May 31, 1998, the Borrower, as the maker, has executed and
delivered to the Lender, as the payee, a certain Seventh Allonge to
$4,000,000.00 Revolving Note Dated February 21, 1991 for the purposes of (i)
extending the maturity date of the Revolving Note from the then existing
maturity date of "May 31, 1998" to a new maturity date of "May 31, 1999"
(hereinafter referred to as the "Seventh Allonge"); and
WHEREAS, as of May 31, 1998, the Borrower, the Corporate Guarantors and the
Lender entered into a certain Seventh Modification Agreement for the purposes of
(i) in Article I, Section 1.1 of the Loan Agreement, amending and modifying the
definition of "Loan Documents" to provide for the Extension Agreement #1, the
Extension Agreement #2, the Extension Agreement #3, the Extension Agreement #4,
the First Modification Agreement, the First Allonge, the Second Modification,
the Second Allonge, the Third Modification Agreement, the Third Allonge, the
Fourth Modification Agreement, the Fourth Allonge, the Fifth Modification
Agreement, the Fifth Allonge, the Sixth Modification Agreement, the Sixth
Allonge, the Seventh Allonge and the Seventh Modification Agreement; (ii) in
Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of
the Revolving Note from the then existing Termination Date of "May 31, 1998" to
a new Termination Date of "May 31, 1999"; (iii) in Article I, Section 1.1 of the
Loan Agreement, providing for the new definitions of: "Extension Agreement #1",
"Extension Agreement #2", "Extension Agreement #3", "Extension Agreement #4",
"First Modification Agreement", "First Allonge", "Second Modification", "Second
Allonge", "Third Modification Agreement", "Third Allonge", "Fourth Modification
Agreement", "Fourth Allonge", "Fifth Modification Agreement", "Fifth Allonge",
"Sixth Modification Agreement", "Sixth Allonge", "Seventh Allonge" and "Seventh
Modification Agreement"; (iv) in Article II, Section 2.4 of the Loan Agreement,
amending and modifying the interest rate options from the then existing interest
rate options of (a) Base Rate or (b) two and one-quarter percent (2.25%) over
the Eurodollar Rate to the new interest rate options of (1) Base Rate minus one
quarter percent (0.25%) or (2) one and one-half percent (1.5%) over the
Eurodollar Rate; (v) in Article II, Section 2.11 of the Loan Agreement, deleting
the unused commitment fee; (vi) in the Loan Documents, deleting any and all
references to the then existing maturity date of "May 31, 1998" and inserting a
new maturity date of "May 31, 1999" in their
8
<PAGE>
place and stead; (vii) in Article V of the Loan Agreement, providing for a new
Section 5.23 with respect to the year 2000; (viii) in the Loan Documents,
providing that any and all references to the "Revolving Note" shall be deemed to
refer to the Revolving Note as amended and modified up through and including the
Seventh Allonge; and (ix) in the Loan Documents, providing that any and all
references to the "Loan Agreement" shall be deemed to refer to the Loan
Agreement as amended and modified up through and including the Seventh
Modification Agreement; and
WHEREAS, as of even date herewith, the Borrower, as the maker, has executed
and delivered to the Lender, as the payee, a certain Eighth Allonge to
$4,000,000.00 Revolving Note Dated February 21, 1991 for the purposes of (i)
amending and modifying the aggregate principal amount of the Revolving Credit
Loan from the existing aggregate principal amount of "$4,500,000.00" to a new,
increased aggregate principal amount of "$6,000,000.00"; (ii) extending the
maturity date of the Revolving Note from the existing maturity date of "May 31,
1999" to a new maturity date of "May 31, 2000"; and (iii) in Paragraph 5 of the
Revolving Note, deleting the existing Paragraph 5 and inserting a new Paragraph
5 in its place and stead (hereinafter referred to as the "Eighth Allonge"); and
WHEREAS, as of even date herewith, the Borrower, the Corporate Guarantors
and the Lender have agreed to enter into this Eighth Modification Agreement for
the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, increasing
the Commitment amount of the Revolving Credit Loan from the existing Commitment
amount of "$4,500,000.00" to a new, increased Commitment amount of
"$6,000,000.00"; (ii) in Article I, Section 1.1 of the Loan Agreement, amending
and modifying the definition of "Loan Documents" to provide for the Eighth
Allonge and this Eighth Modification Agreement; (iii) in Article I, Section 1.1
of the Loan Agreement, extending the Termination Date of the Revolving Note from
the existing Termination Date of "May 31, 1999" to a new Termination Date of
"May 31, 2000"; (iv) in Article I, Section 1.1 of the Loan Agreement, providing
for the new definitions of "Eighth Allonge" and "Eighth Modification Agreement";
(v) in the Loan Documents, deleting any and all references to the existing
Termination Date / maturity date of "May 31, 1999" and inserting a new
Termination Date / maturity date of "May 31, 2000" in their place and stead;
(vi) in the Loan Documents, providing that any and all references to the
"Revolving Note" shall be deemed to refer to the Revolving Note as amended and
modified up through and including the Eighth Allonge; and (vii) in the Loan
Documents, providing that any and all references to the "Loan Agreement" shall
be deemed to refer to the Loan Agreement as amended and modified up through and
including this Eighth Modification Agreement; and
WHEREAS, all words and terms not defined here shall have the meaning as
contained in the Loan Agreement, as amended and modified up through and
including the Seventh Modification Agreement; and
WHEREAS, the aforesaid Revolving Note, the Loan Agreement, the Corporate
Guaranty, the Assignment #1, the Assignment #2, the Extension Agreement #1, the
Extension Agreement #2, the Extension Agreement #3, the Extension Agreement #4,
the First Allonge, the First Modification Agreement, the Second Allonge, the
Second Modification Agreement, the Third Allonge, the Third Modification
Agreement, the Fourth Allonge, the Fourth Modification
9
<PAGE>
Agreement, the Fifth Allonge, the Fifth Modification Agreement, the Sixth
Allonge, the Sixth Modification Agreement, the Seventh Allonge, the Seventh
Modification Agreement, the Eighth Allonge, this Eighth Modification Agreement
and any and all of the documents, agreements, certificates and instruments
executed in connection herewith shall be hereinafter collectively referred to as
the "Loan Documents"; and
NOW, THEREFORE, in consideration of these premises and the mutual
representations, covenants and agreements of the Borrower, the Corporate
Guarantors and the Lender, each party binding itself and its successors and
assigns does hereby promise, covenant and agree as follows:
1. There is, as of February 22, 1999, presently due and owing on the
Revolving Note the principal sum $3,700,000.00, without defense, offset or
counterclaim, all of which are hereby expressly waived by the Borrower and the
Corporate Guarantors as of the date hereof. The foregoing principal balance is
allocated as follows: (a) $3,700,000.00 for outstanding Advances of direct loans
under the Note and (b) $ -0- for Letters of Credit.
2. By execution hereof, the Borrower and the Corporate Guarantors
acknowledge and agree that the Lender's consent to enter into this Eighth
Modification Agreement is contingent upon the following:
(a) the payment by the Borrower of all costs, expenses and fees of the
transaction contemplated by this Eighth Modification Agreement, including,
but not limited to (i) all search costs and expenses, (ii) all fees and
expenses of the Lender's attorneys and (iii) all accrued and unpaid
interest up to and including the date hereof; and
(b) the continued delivery by the Borrower to the Lender of copies of
all valid insurance certificates with respect to worker's compensation,
general liability, umbrella liability and other insurance required pursuant
to the Loan Agreement, as previously amended and modified, all of which
name the Lender as lender and/or loss payee with respect to Accounts
Receivable, Inventory, Equipment and other corporate assets.
3. To the best of the Borrower's and each Corporate Guarantor's knowledge,
the Borrower and each Corporate Guarantor hereby represent that the lien on the
Collateral granted to the Lender under the Loan Agreement, as amended and
modified up through and including this Eighth Modification Agreement, continue
to be valid and enforceable first lien on the Collateral.
4. The Loan Agreement, as previously amended and modified, is hereby
further amended and modified, as follows:
(a) Article I, Section 1.1 shall be amended and modified as follows:
(i) Subsection (m) shall be amended and modified by deleting the
existing Commitment amount of "Four Million Five Hundred Thousand and
00/100
10
<PAGE>
($4,500,000.00) Dollars" and inserting a new increased Commitment
amount of "Six Million and 00/100 ($6,000,000.00) Dollars" in its
place and stead.
(ii) Subsection (cc) shall be amended and modified by inserting a
reference to "Eighth Allonge" and "Eighth Modification Agreement".
(iii) Subsection (ll) shall be amended and modified by deleting
the existing Termination Date of "May 31,1999" and inserting a new
Termination Date of "May 31, 2000" in its place and stead.
(iv) The following new definitions shall be inserted:
""Eighth Allonge" shall mean that certain Eighth Allonge to
$4,000,000.00 Revolving Note Dated February 20, 1991 dated
February 5th, 1999 pursuant to which the Borrower and the Lender
agreed to further amend and modify the terms of the Note for the
purposes of (i) amending and modifying the aggregate principal
amount of the loan from the then existing aggregate principal
amount of "$4,500,000.00" to a new, increased aggregate principal
amount of "$6,000,000.00"; (ii) extending the maturity date of
the Note from the existing maturity date of "May 31, 1999" to a
new maturity date of "May 31, 2000"; and (iii) in Paragraph 5 of
the Note, deleting the existing Paragraph 5 and inserting a new
Paragraph 5 in its place and stead."
""Eighth Modification Agreement" shall mean that certain Eighth
Modification Agreement dated February 5th, 1999, pursuant to
which the Borrower, the Corporate Guarantors and the Lender
agreed to further amend and modify the terms of this Agreement
and the other Loan Documents, all as previously amended and
modified for the purposes of (i) in Article I, Section 1.1 of
this Agreement, increasing the Commitment amount from the
existing Commitment amount of "$4,500,000.00" to a new, increased
Commitment amount of "$6,000,000.00"; (ii) in Article I, Section
1.1 of this Agreement, amending and modifying the definition of
"Loan Documents" to provide for the Eighth Allonge and this
Eighth Modification Agreement; (iii) in Article I, Section 1.1 of
this Agreement, extending the Termination Date of the Revolving
Note from the existing Termination Date of "May 31, 1999" to a
new Termination Date of "May 31, 2000"; (iv) in Article I,
Section 1.1 of this Agreement, providing for the new definitions
of "Eighth Allonge" and "Eighth Modification Agreement"; (v) in
the Loan Documents, deleting any and all references to the
existing Termination Date / maturity date of "May 31, 1999" and
inserting a new Termination Date / maturity date of "May 31,
2000" in their place and stead; (vi) in the Loan Documents,
providing that any and all references to the "Note" shall be
deemed to refer to the Note as amended and modified up through
and including the Eighth Allonge; and
11
<PAGE>
(vii) in the Loan Documents, providing that any and all
references to the "Loan Agreement" shall be deemed to refer to
the Loan Agreement as amended and modified up through and
including the Eighth Modification Agreement."
5. The Loan Documents, as previously amended and modified, are hereby
further amended and modified as follows:
(a) Any and all references to the existing Commitment amount of "Four
Million Five Hundred Thousand and 00/100 ($4,500,000.00) Dollars" shall be
deleted and the new increased Commitment amount of "Six Million and 00/100
($6,000,000.00) Dollars" shall be inserted in their place and stead.
(b) Any and all references to the existing Termination Date / maturity
date of "May 31, 1999" shall be deleted and a new Termination Date /
maturity date of "May 31, 2000" shall be inserted in their place and stead.
(c) Any and all references to the "Revolving Note" shall be deemed to
refer to the Revolving Note as amended and modified up through and
including the Eighth Allonge.
(d) Any and all references to the "Loan Agreement" shall be deemed to
refer to the Loan Agreement as amended and modified up through and
including this Eighth Modification Agreement.
6. To the best of the Borrower's and each of the Corporate Guarantors'
knowledge, all representations and warranties contained in the Loan Documents,
as amended and modified through this Eighth Modification Agreement are true,
accurate and complete as of the date hereof and shall be deemed continuing
representations and warranties so long as the Revolving Credit Loan shall remain
outstanding.
7. The Borrower and the Corporate Guarantors expressly confirm and affirm
that the Corporate Guaranty remains in full force and effect as a continuing
guaranty of the full, prompt and unconditional payment of all present and future
obligations and/or liabilities of any kind of the Borrower due and owing to the
Lender, including, without limitation, the repayment in full of the Revolving
Credit Loan.
8. All other terms and conditions of the Loan Documents, as amended and
modified through this Eighth Modification Agreement, remain in full force and
effect, except as amended and modified herein, and the parties hereto hereby
expressly confirm and reaffirm all of their respective liabilities, obligations,
duties and responsibilities under and pursuant to said Loan Documents,
including, without limitation, the obligations of the Corporate Guarantors under
the Corporate Guaranty, as amended and modified by this Eighth Modification
Agreement.
9. It is the intention of the parties hereto that this Eighth Modification
Agreement shall not constitute a novation and shall in no way adversely affect
or impair the lien priority of
12
<PAGE>
the Loan Documents. In the event this Eighth Modification Agreement, or any
portion hereof in any of the instruments executed in connection herewith shall
be construed or shall operate to affect the lien priority of the Loan Documents,
then to the extent such instrument creates a charge upon the Loan Documents in
excess of that contemplated and permitted thereby, and to the extent third
parties acquiring an interest in the Loan Documents between the time of
recording of the Loan Documents and the recording of this Eighth Modification
Agreement are prejudiced hereby, if any, this Eighth Modification Agreement
shall be void and of no force and effect; provided, however, that
notwithstanding the foregoing, the parties hereto, as between themselves, shall
be bound by all terms and conditions hereof until all indebtedness evidenced by
the Revolving Note shall have been paid in full and the Revolving Credit Loan
terminated.
10. The Borrower and the Corporate Guarantors do hereby:
(a) ratify, confirm and acknowledge that, as amended and modified
hereby, the Loan Documents continue to be valid, binding and in full force
and effect;
(b) covenant and agree to perform all of their respective obligations
contained in the Loan Documents, as amended and modified hereby;
(c) represent and warrant that, after giving effect to the
transactions contemplated by this Eighth Modification Agreement, no "Event
of Default" (as such term is defined in the Loan Agreement), exists or will
exist upon the delivery of notice, passage of time, or both;
(d) acknowledge and agree that nothing contained herein and no actions
taken pursuant to the terms hereof are intended to constitute a novation of
the Revolving Note or of the Revolving Credit Loan, or any waiver of any of
the other Loan Documents, and do not constitute a release, termination or
waiver of any of the liens, security interests or rights or remedies
granted to the Lender under the Loan Documents, all of which liens,
security interests, rights or remedies are hereby ratified, confirmed and
continued as security for the Revolving Credit Loan, as amended and
modified hereby; and
(e) acknowledge and agree that the failure by the Borrower and/or the
Corporate Guarantors to comply with or perform any of their respective
covenants, agreements or obligations contained herein shall constitute an
Event of Default under the Loan Agreement.
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Eighth Modification
Agreement to be duly executed, sealed and attested and/or witnessed, as
appropriated, and delivered, all as of the day and year first above written.
[SEAL] JOULE, INC., a Delaware
ATTEST: corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
[SEAL] JOULE MAINTENANCE
ATTEST: CORPORATION, a New Jersey
corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
[SEAL] JOULE TECHNICAL
ATTEST: SERVICES, INC., a New Jersey
corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
[SEAL] JOULE TECHNICAL
ATTEST: STAFFING, INC., a New Jersey
corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
SUMMIT BANK
By:
-----------------------------
Bonnie Gershon
Vice President
14
<PAGE>
STATE OF NEW JERSEY :
: ss.
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this ____ day of February, 1999, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgments for use in the State of New Jersey, personally appeared Bonnie
Gershon, who, I am satisfied is the person who executed the within Instrument,
as the Vice President of Summit Bank, the corporation named therein, and I
having first made know to her the contents thereof, she did thereupon
acknowledge that the said Instrument made by the said corporation and sealed
with its corporate seal and delivered by her as such officer, is the voluntary
act and deed of said corporation, made by virtue of authority from its Board of
Directors, for the uses and purposes therein expressed.
Notary Public of the State of New Jersey
STATE OF NEW JERSEY :
: ss.
COUNTY OF MORRIS :
BE IT REMEMBERED, that on this ____ day of February, 1999, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgments for use in the State of New Jersey, personally appeared Emanuel
N. Logothetis, who, I am satisfied is the person who executed the within
Instrument, as the Chairman of Joule, Inc., Joule Maintenance Corporation,
Joule Technical Services, Inc. and Joule Technical Staffing, Inc., the
corporations named therein, and I having first made know to him the contents
thereof, he did thereupon acknowledge that the said Instrument made by said
corporations and sealed with their corporate seals and delivered by him as such
officer, is the voluntary act and deed of said corporations, made by virtue of
authority from their respective Boards of Directors, for the uses and purposes
therein expressed.
Notary Public of the State of New Jersey
- --------------------------------------------------------------------------------
NINTH AMENDMENT AND MODIFICATION AGREEMENT
by and among
JOULE, INC.,
as the Borrower
and
JOULE MAINTENANCE CORPORATION,
JOULE TECHNICAL SERVICES, INC. and
JOULE TECHNICAL STAFFING, INC.,
collectively as the Corporate Guarantors
and
SUMMIT BANK,
as the Lender
Dated: As of May 10th, 1999
- --------------------------------------------------------------------------------
<PAGE>
NINTH AMENDMENT AND MODIFICATION AGREEMENT
THIS NINTH AMENDMENT AND MODIFICATION AGREEMENT (hereinafter as it may be
from time to time amended, modified, extended, renewed, refinanced and/or
supplemented referred to as this "Ninth Modification Agreement"), is made as of
the 10th day of May, 1999, by and among
JOULE, INC., a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, having its principal executive
office located at 1245 Route 1 South, Edison, New Jersey 08837 (hereinafter
referred to as the "Borrower"),
AND
JOULE MAINTENANCE CORPORATION, a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, having
its principal executive office located at 1245 Route 1 South, Edison, New Jersey
08837 (hereinafter referred to as "Joule Maintenance Corporation"),
AND
JOULE TECHNICAL SERVICES, INC., as successor-in-interest pursuant to the
merger of JOULE ENGINEERING CORP., JOULE TEMPORARIES CORPORATION, JOULE
MAINTENANCE OF MARYLAND, INC., JOULE TECHNICAL CORPORATION, JOULE MAINTENANCE OF
GIBBSTOWN, INC., JOULE MAINTENANCE OF NEW YORK, INC. AND TIGER MAINTENANCE, a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey, having its principal executive office located at
1245 Route 1 South, Edison, New Jersey 08837 (hereinafter referred to as "Joule
Technical Services, Inc."),
AND
JOULE TECHNICAL STAFFING, INC., a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, having
its principal executive office located at 1245 Route 1 South, Edison, New Jersey
08837 (hereinafter referred to as "Joule Technical Staffing, Inc." and
hereinafter Joule Maintenance Corporation, Joule Technical Services, Inc. and
Joule Technical Staffing, Inc. shall be collectively be referred to as the
"Corporate Guarantors"),
AND
SUMMIT BANK, as successor-in-interest to UNITED JERSEY BANK, having an
office located at 210 Main Street, Hackensack, New Jersey 07601, being a banking
institution duly organized and validly existing under the laws of the State of
New Jersey (hereinafter referred to as the "Lender").
1
<PAGE>
W I T N E S S E T H:
WHEREAS, on or about February 20, 1991, the Borrower requested and the
Lender agreed to make a revolving credit loan in the aggregate principal amount
of up to Four Million and 00/100 ($4,000,000.00) Dollars for the purposes of (i)
refinancing certain of the Borrower's then existing indebtedness to First
Fidelity Bank, National Association and (ii) financing the general working
capital requirements of the Borrower (hereinafter as it may be from time to time
amended, modified, extended, renewed, refinanced and/or supplemented referred to
as the "Revolving Credit Loan"), all as more fully provided for in that certain
Loan and Security Agreement dated February 20, 1991, executed by and between the
Borrower and the Lender (hereinafter as it may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented referred to as the
"Loan Agreement"); and
WHEREAS, the Revolving Credit Loan is evidenced by a certain Revolving Note
dated February 20, 1991, executed by the Borrower, as the maker, and delivered
to the Lender, as the payee, in the original aggregate principal amount of the
Revolving Credit Loan (hereinafter as it may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented referred to as the
"Revolving Note"); and
WHEREAS, pursuant to the terms, conditions and provisions of the Loan
Agreement, the Borrower, Joule Maintenance Corporation, Joule Maintenance of
Gibbstown, Inc. (hereinafter referred to as "Joule Maintenance of Gibbstown,
Inc."), Joule Engineering Corp. (hereinafter referred to as "Joule Engineering
Corp."), Joule Engineering of California, Inc. (hereinafter referred to as
"Joule Engineering of California, Inc."), Joule Technical Corporation
(hereinafter referred to as "Joule Technical Corporation"), Joule Temporaries
Corporation (hereinafter referred to as "Joule Temporaries Corporation"), Joule
Maintenance of New York, Inc. (hereinafter referred to as "Joule Maintenance of
New York, Inc."), Joule Maintenance of Maryland, Inc. (hereinafter referred to
as "Joule Maintenance of Maryland, Inc."), Joule Engineering of Pennsylvania,
Inc. (hereinafter referred to as "Joule Engineering of Pennsylvania, Inc."),
Joule Constructors, Inc. (hereinafter referred to as "Joule Constructors,
Inc."), Joule Temporaries of Edison, Inc. (hereinafter referred to as "Joule
Temporaries of Edison, Inc."), Joule Temporaries of Parsippany, Inc.
(hereinafter referred to as "Joule Temporaries of Parsippany, Inc."), Joule
Operating Services, Inc. (hereinafter referred to as "Joule Operating Services,
Inc."), Tiger Maintenance, Inc. (hereinafter referred to as "Tiger Maintenance,
Inc.") and Joule Maintenance of Bayonne, Inc. (hereinafter referred to as "Joule
Maintenance of Bayonne, Inc." and hereinafter Joule Maintenance Corporation,
Joule Maintenance of Gibbstown, Inc., Joule Engineering Corp., Joule Engineering
of California, Inc., Joule Technical Corporation, Joule Temporaries Corporation,
Joule Maintenance of New York, Inc., Joule Maintenance of Maryland, Inc., Joule
Engineering of Pennsylvania, Inc., Joule Constructors, Inc., Joule Temporaries
of Edison, Inc., Joule Temporaries of Parsippany, Inc., Joule Operating
Services, Inc., Tiger Maintenance, Inc., and Joule Maintenance of Bayonne, Inc.
shall be collectively referred to as the "Original Corporate Guarantors")
granted to the Lender a valid first lien security interest in and to certain
Collateral, as more fully and accurately described in the Loan Agreement; and
2
<PAGE>
WHEREAS, as of February 20, 1991, Emanuel N. Logothetis, as the guarantor
(hereinafter referred to as the "Individual Guarantor"), executed and delivered
to the Lender, as the lender, a certain Individual Guaranty, pursuant to which
the Individual Guarantor agreed to guaranty the full, prompt and unconditional
payment of when due of any and all present and future obligations or liabilities
of any kind of the Borrower owing to the Lender, including, without limitation,
the repayment in full of the Revolving Credit Loan (hereinafter as it may be
from time to time amended, modified, extended, renewed, refinanced and/or
supplemented referred to as the "Individual Guaranty"); and
WHEREAS, as of February 20, 1991, each Original Corporate Guarantor, each
as a guarantor, executed and delivered to the Lender, as the lender, a separate
Corporate Guaranty, pursuant to which each Original Corporate Guarantor agreed
to guaranty the full, prompt and unconditional payment of when due of any and
all present and future obligations or liabilities of any kind of the Borrower
owing to the Lender, including, without limitation, the repayment in full of the
Revolving Credit Loan (hereinafter as each may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented collectively
referred to as the "Corporate Guaranty"); and
WHEREAS, on January 17, 1991, the Borrower, as the assignor, delivered to
the Lender, as the assignee, a certain Assignment of Life Insurance Policy as
Collateral with respect to that certain life insurance policy no. U01426631
issued by the Hartford Insurance Company upon the life of the Individual
Guarantor (hereinafter as it may be from time to time amended, modified,
extended, renewed, refinanced and/or supplemented referred to as the "Assignment
#1"), as collateral security for the Borrower's obligations under the Loan
Agreement; and
WHEREAS, on February 20, 1991, Joule Maintenance Corporation, as
successor-in-interest to Joule Maintenance Corp., as the assignor, executed and
delivered to the Lender, as the assignee, a certain Collateral Assignment of
Contract Proceeds with respect to that certain contract between Joule
Maintenance Corporation and the United States Government identified as Contract
No. DAHC21-85-C-0021 (hereinafter as it may be from time to time amended,
modified, extended, renewed, refinanced and/or supplemented referred to as the
"Assignment #2"), as collateral security for the repayment of the liabilities
and obligations of Joule Maintenance Corporation to the Lender under the Loan
Agreement and under the Corporate Guaranty; and
WHEREAS, on September 1, 1991, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Promissory Note for the purpose
of extending the term of the Revolving Credit Loan from the then current
maturity date of "September 1, 1991", to a new maturity date of "January 15,
1992" (hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#1"); and
3
<PAGE>
WHEREAS, on January 15, 1992, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Master Advance Note for the
purpose of extending the term of the Revolving Credit Loan from the then current
maturity date of "January 15, 1992" to a new maturity date of "January 31, 1993"
(hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#2"); and
WHEREAS, on January 31, 1993, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Master Advance Note for the
purpose of extending the term of the Revolving Credit Loan from the then current
maturity date of "January 31, 1993" to a new maturity date of "January 31, 1994"
(hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#3"); and
WHEREAS, on January 31, 1994, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Master Advance Note for the
purpose of extending the term of the Revolving Credit Loan from the then current
maturity date of "January 31, 1994" to a new maturity date of "March 31, 1994"
(hereinafter as it may be from time to time amended, modified, extended,
renewed, refinanced and/or supplemented referred to as the "Extension Agreement
#4"); and
WHEREAS, on March 31, 1994, the Borrower, the Original Corporate
Guarantors, the Individual Guarantor and the Lender entered into a certain First
Modification and Extension Agreement for the purposes of (i) in Article I,
Section 1.1 of the Loan Agreement, extending the Termination Date of the
Revolving Note from the then current Termination Date of "March 31, 1994" to a
new Termination Date of "January 31, 1995"; (ii) amending and modifying the
Lender's address from the old address of "630 Franklin Boulevard, Somerset, New
Jersey 08875" to "4365 Route 1 South, Princeton, New Jersey 08540"; (iii)
providing for a mutual waiver of jury trial; and (iv) providing for semi-annual
audits of Collateral (hereinafter referred to as the "First Modification
Agreement"); and
WHEREAS, on March 31, 1994, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain First Allonge to $4,000,000.00
Revolving Note for the purposes of (i) extending the maturity date of the
Revolving Note from the then current maturity date of "March 31, 1994" to a new
maturity date of "January 31, 1995" and (ii) amending and modifying the Lender's
address from the old address of "630 Franklin Boulevard, Somerset, New Jersey
08875" to "4365 Route 1 South, Princeton, New Jersey 08540" (hereinafter
referred to as the "First Allonge"); and
WHEREAS, Joule Engineering of California, Inc., Joule Engineering of
Pennsylvania, Inc., Joule Constructors, Inc., Joule Temporaries of Edison, Inc.,
Joule Temporaries of Parsippany, Inc. and Joule Operating Services, Inc. each
had their respective charters revoked and are no longer doing business; and
4
<PAGE>
WHEREAS, as of January 31, 1995, the Borrower, the Original Corporate
Guarantors, the Individual Guarantor and the Lender entered into a certain
Second Modification and Extension Agreement (hereinafter referred to as the
"Second Modification Agreement") for the purposes of (i) in Article I, Section
1.1 of the Loan Agreement, extending the Termination Date of the Revolving Note
from the then current Termination Date of "January 31, 1995" to a new
Termination Date of "January 31, 1996"; (ii) in Article II, Section 2.4 of the
Loan Agreement, decreasing the interest rate from the then existing interest
rate of "Base Rate plus one and one-half percent (1.5%) per annum" to a new
interest rate of "Base Rate plus one percent (1.0%) per annum"; (iii) amending
and modifying the Lender's audits of Collateral from semi-annual audits of
Collateral to annual audits of Collateral; and (iv) amending and modifying the
Lender's name from the then existing name of "United Jersey Bank/Central, N.A."
to the new name of "United Jersey Bank"; and
WHEREAS, as of January 31, 1995, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Second Allonge to $4,000,000.00
Revolving Note for the purposes of (i) extending the maturity date of the
Revolving Note from the then current maturity date "January 31, 1995" to a new
maturity date of "January 31, 1996"; (ii) decreasing the interest rate from the
then existing interest rate of "Base Rate plus one and one-half percent (1.5%)
per annum" to the new interest rate of "Base Rate plus one percent (1.0%) per
annum"; and (iii) amending and modifying the name of the Lender from the
Lender's existing name of "United Jersey Bank/Central, N.A." to the Lender's new
name of "United Jersey Bank" (hereinafter referred to as the "Second Allonge");
and
WHEREAS, on August 23, 1995, the Borrower, the Original Corporate
Guarantors and the Lender entered into a certain Third Modification and
Extension Agreement (hereinafter referred to as the "Third Modification
Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan
Agreement, increasing the original aggregate principal amount of the Revolving
Credit Loan from the then existing aggregate principal amount of "$4,000,000.00"
to the new increased aggregate principal amount of "$4,500,000.00"; (ii) in
Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of
the Revolving Note from the then current Termination Date of "January 31, 1996"
to a new Termination Date of "May 31, 1996"; (iii) in Article II, Section 2.2 of
the Loan Agreement, providing for the issuance of Letters of Credit; (iv) in
Article V of the Loan Agreement, providing for a new section, Section 5.23,
which provides for the Borrower's Maximum Debt to Tangible Net Worth Ratio of
2.0 -to- 1.0; (v) in Article V of the Loan Agreement, providing for a new
section, Section 5.24, which provides for the Borrower's Maximum Debt Service
Coverage Ratio of 1.5 -to- 1.0; (vi) providing for a release of the Individual
Guarantor from the Individual Guaranty; and (vii) amending and modifying the
Lender's address from the then existing address of "4365 Route 1 South,
Princeton, New Jersey 08540" to a new address of "Raritan Plaza II, Fieldcrest
Avenue, Edison, New Jersey 08837"; and
5
<PAGE>
WHEREAS, on August 23, 1995, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Third Allonge to $4,000,000.00
Revolving Note for the purposes of (i) increasing the original aggregate
principal amount of the Revolving Credit Loan from the then existing aggregate
principal amount of "$4,000,000.00" to a new increased aggregate principal
amount of "4,500,000.00"; (ii) extending the maturity date of the Revolving Note
from the then current maturity date of "January 31, 1996" to a new maturity date
of "May 31, 1996"; and (iii) amending and modifying the Lender's address from
the then existing address of "4365 Route 1 South, Princeton, New Jersey 08540"
to a new address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey
08837" (hereinafter referred to as the "Third Allonge"); and
WHEREAS, Joule Maintenance Corp. and Joule Maintenance of Bayonne, Inc.
were merged and consolidated and Joule Maintenance Corporation is the
successor-in-interest to both companies; and
WHEREAS, on February 6, 1996, the Borrower, the Original Corporate
Guarantors and the Lender entered into a certain Fourth Modification and
Extension Agreement (hereinafter referred to as the "Fourth Modification
Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan
Agreement, providing for the definition of "Borrowing"; (ii) in Article I,
Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar
Affiliate"; (iii) in Article I, Section 1.1 of the Loan Agreement, providing for
the definition of "Eurodollar Interest Period"; (iv) in Article I, Section 1.1
of the Loan Agreement, providing for the definition of "Eurodollar Interest
Payment Date"; (v) in Article I, Section 1.1 of the Loan Agreement, providing
for the definition of "Eurodollar Interest Rate Determination Date"; (vi) in
Article I, Section 1.1 of the Loan Agreement, providing for the definition of
"Eurodollar Portion"; (vii) in Article I, Section 1.1 of the Loan Agreement,
providing for the definition of "Eurodollar Rate"; (viii) in Article I, Section
1.1 of the Loan Agreement, providing of the definition of "Eurodollar Rate
Loans"; (ix) in Article I, Section 1.1 of the Loan Agreement, providing for the
definition of "Eurodollar Rate Taxes"; (x) in Article I, Section 1.1 of the Loan
Agreement, providing for the definition of "Eurodollar Reserve Percentage"; (xi)
in Article I, Section 1.1 of the Loan Agreement, providing for the definition of
"Funding Segment"; (xii) in Article II, Section 2.4 of the Loan Agreement,
deleting the then existing Section 2.4 and inserting a new Section 2.4 which
provides that the Borrower may select an interest rate from the interest rate
options between either (1) the Base Rate option or (2) the Eurodollar Rate
Option; (xiii) in Article II of the Loan Agreement, providing for a new section,
Section 2.11, which provides for the Borrower's payment of an unused commitment
fee; and (xiv) in Article II of the Loan Agreement, providing for a new section,
Section 2.12, which provides for the special provisions governing Eurodollar
Rate Loans; and
WHEREAS, on February 6, 1996, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Fourth Allonge to $4,000,000.00
Revolving Note for the purpose of deleting the then existing Paragraph 2 of the
Revolving Note and inserting a new Paragraph 2 which provides that the interest
rate to be charged on the outstanding aggregate principal amount of the Loan
shall be set forth in Article II, Section 2.4 of the Loan Agreement (hereinafter
referred to as the "Fourth Allonge"); and
6
<PAGE>
WHEREAS, as of May 31, 1996, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Fifth Allonge to $4,000,000.00
Revolving Note for the purpose of extending the maturity date of the Revolving
Note from the then existing maturity date of "May 31, 1996" to a new maturity
date of "May 31, 1997" (hereinafter referred to as the "Fifth Allonge"); and
WHEREAS, as of May 31, 1996, the Borrower, the Original Corporate
Guarantors and the Lender entered into a certain Fifth Modification and
Extension Agreement (hereinafter referred to as the "Fifth Modification
Agreement") for the purpose of, in Article I, Section 1.1 of the Loan Agreement,
extending the Termination Date of the Revolving Note from the then existing
Termination Date of "May 31,1996" to a new Termination Date of "May 31, 1997";
and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Engineering Corp. was merged with Joule Technical Services, Inc.; and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Temporaries Corporation was merged with Joule Technical Services, Inc.; and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Maintenance of Maryland, Inc. was merged with Joule Technical Services, Inc.;
and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Technical Corporation was merged with Joule Technical Services, Inc.; and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Maintenance of Gibbstown, Inc. was merged with Joule Technical Services, Inc.;
and
WHEREAS, pursuant to a certain Certificate of Merger from the Office of the
Secretary of State of the State of New Jersey dated February 3, 1997, Joule
Maintenance of New York, Inc. was merged with Joule Technical Services, Inc.;
and
WHEREAS, Tiger Maintenance is no longer doing business and its charter has
been revoked; and
7
<PAGE>
WHEREAS, as of May 31, 1997, the Borrower, the Corporate Guarantors and the
Lender entered into a certain Sixth Modification and Extension Agreement
(hereinafter referred to as the "Sixth Modification Agreement"), for the
purposes of (i) in Article I, Section 1.1 of the Loan Agreement, deleting the
then existing definition of "Corporate Guarantors" and inserting a new
definition of "Corporate Guarantors" in its place and stead; (ii) in Article I,
Section 1.1 of the Loan Agreement, extending the Termination Date of the
Revolving Note from the then existing Termination Date of "May 31, 1997" to a
new Termination Date of "May 31,1998"; (iii) in Article V, Section 5.8(d) of the
Loan Agreement providing for the consolidated balance sheet of the Obligors;
(iv) in the Loan Agreement, amending and modifying the Lender's address from the
then existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New
Jersey 08837" to a new address of "210 Main Street, Hackensack, New Jersey
07601"; (v) in the "Loan Documents" (as such term is hereinafter defined),
providing that any and all references to the "Corporate Guarantors" shall be
deemed to refer to the Corporate Guarantors; (vi) in the Loan Documents,
deleting any and all references to the then existing maturity date of "May 31,
1997" and inserting a new maturity date of "May 31, 1998" in their place and
stead and (vii) in the Loan Documents, amending and modifying the Lender's
address from the then existing address of "Raritan Plaza II, Fieldcrest Avenue,
Edison, New Jersey 08837" to a new address of "210 Main Street, Hackensack, New
Jersey 07601"; and
WHEREAS, as of May 31, 1997, the Borrower as the maker, executed and
delivered to the Lender, as the payee, a certain Sixth Allonge to $4,000,000.00
Revolving Note for the purposes of (i) extending the maturity date of the
Revolving Note from the then existing maturity date of "May 31, 1997" to a new
maturity date of "May 31, 1998" and (ii) amending and modifying the Lender's
address from the then existing address of "Raritan Plaza II, Fieldcrest Avenue,
Edison, New Jersey 08837" to a new address of "210 Main Street, Hackensack, New
Jersey 07601" (hereinafter referred to as the "Sixth Allonge"); and
WHEREAS, as of May 31, 1998, the Borrower, as the maker, has executed and
delivered to the Lender, as the payee, a certain Seventh Allonge to
$4,000,000.00 Revolving Note Dated February 21, 1991 for the purposes of (i)
extending the maturity date of the Revolving Note from the then existing
maturity date of "May 31, 1998" to a new maturity date of "May 31, 1999"
(hereinafter referred to as the "Seventh Allonge"); and
WHEREAS, as of May 31, 1998, the Borrower, the Corporate Guarantors and the
Lender entered into a certain Seventh Modification and Extension Agreement
(hereinafter referred to as the "Seventh Modification Agreement") for the
purposes of (i) in Article I, Section 1.1 of the Loan Agreement, amending and
modifying the definition of "Loan Documents" to provide for the Extension
Agreement #1, the Extension Agreement #2, the Extension Agreement #3, the
Extension Agreement #4, the First Modification Agreement, the First Allonge, the
Second Modification, the Second Allonge, the Third Modification Agreement, the
Third Allonge, the Fourth Modification Agreement, the Fourth Allonge, the Fifth
Modification Agreement, the Fifth Allonge, the Sixth Modification Agreement, the
Sixth Allonge, the Seventh Allonge and the Seventh Modification Agreement; (ii)
in Article I, Section 1.1 of the Loan Agreement, extending the Termination Date
of the Revolving Note from the then existing Termination Date of "May 31, 1998"
to a new Termination Date of "May 31, 1999"; (iii) in
8
<PAGE>
Article I, Section 1.1 of the Loan Agreement, providing for the new definitions
of: "Extension Agreement #1", "Extension Agreement #2", "Extension Agreement
#3", "Extension Agreement #4", "First Modification Agreement", "First Allonge",
"Second Modification", "Second Allonge", "Third Modification Agreement", "Third
Allonge", "Fourth Modification Agreement", "Fourth Allonge", "Fifth Modification
Agreement", "Fifth Allonge", "Sixth Modification Agreement", "Sixth Allonge",
"Seventh Allonge" and "Seventh Modification Agreement"; (iv) in Article II,
Section 2.4 of the Loan Agreement, amending and modifying the interest rate
options from the then existing interest rate options of (a) Base Rate or (b) two
and one-quarter percent (2.25%) over the Eurodollar Rate to the new interest
rate options of (1) Base Rate minus one quarter percent (0.25%) or (2) one and
one-half percent (1.5%) over the Eurodollar Rate; (v) in Article II, Section
2.11 of the Loan Agreement, deleting the unused commitment fee; (vi) in the Loan
Documents, deleting any and all references to the then existing maturity date of
"May 31, 1998" and inserting a new maturity date of "May 31, 1999" in their
place and stead; (vii) in Article V of the Loan Agreement, providing for a new
Section 5.23 with respect to the year 2000; (viii) in the Loan Documents,
providing that any and all references to the "Revolving Note" shall be deemed to
refer to the Revolving Note as amended and modified up through and including the
Seventh Allonge; and (ix) in the Loan Documents, providing that any and all
references to the "Loan Agreement" shall be deemed to refer to the Loan
Agreement as amended and modified up through and including the Seventh
Modification Agreement; and
WHEREAS, on February 5, 1999, the Borrower, as the maker, executed and
delivered to the Lender, as the payee, a certain Eighth Allonge to $4,000,000.00
Revolving Note Dated February 21, 1991 for the purposes of (i) amending and
modifying the aggregate principal amount of the Revolving Credit Loan from the
then existing aggregate principal amount of "$4,500,000.00" to a new, increased
aggregate principal amount of "$6,000,000.00"; (ii) extending the maturity date
of the Revolving Note from the then existing maturity date of "May 31, 1999" to
a new maturity date of "May 31, 2000"; and (iii) in Paragraph 5 of the Revolving
Note, deleting the then existing Paragraph 5 and inserting a new Paragraph 5 in
its place and stead (hereinafter referred to as the "Eighth Allonge"); and
WHEREAS, on February 5, 1999, the Borrower, the Corporate Guarantors and
the Lender entered into a certain Eighth Modification and Extension Agreement
(hereinafter referred to as the "Eighth Modification Agreement") for the
purposes of (i) in Article I, Section 1.1 of the Loan Agreement, increasing the
Commitment amount of the Revolving Credit Loan from the then existing Commitment
amount of "$4,500,000.00" to a new, increased Commitment amount of
"$6,000,000.00"; (ii) in Article I, Section 1.1 of the Loan Agreement, amending
and modifying the definition of "Loan Documents" to provide for the Eighth
Allonge and the Eighth Modification Agreement; (iii) in Article I, Section 1.1
of the Loan Agreement, extending the Termination Date of the Revolving Note from
the then existing Termination Date of "May 31, 1999" to a new Termination Date
of "May 31, 2000"; (iv) in Article I, Section 1.1 of the Loan Agreement,
providing for the new definitions of "Eighth Allonge" and "Eighth Modification
Agreement"; (v) in the Loan Documents, deleting any and all references to the
then existing Termination Date / maturity date of "May 31, 1999" and inserting a
new Termination Date / maturity date of "May 31, 2000" in their place and stead;
(vi) in the Loan Documents, providing that any and all references to the
"Revolving Note" shall be deemed to refer to the Revolving
9
<PAGE>
Note as amended and modified up through and including the Eighth Allonge; and
(vii) in the Loan Documents, providing that any and all references to the "Loan
Agreement" shall be deemed to refer to the Loan Agreement as amended and
modified up through and including the Eighth Modification Agreement; and
WHEREAS, as of even date herewith, the Borrower, as the maker, has executed
and delivered to the Lender, as the payee, a certain Ninth Allonge to
$4,000,000.00 Revolving Note Dated February 21, 1991 for the purposes of
amending and modifying the aggregate principal amount of the Revolving Credit
Loan from the existing aggregate principal amount of "$6,000,000.00" to a new,
increased aggregate principal amount of "$8,500,000.00" (hereinafter referred to
as the "Ninth Allonge"); and
WHEREAS, as of even date herewith, the Borrower, the Corporate Guarantors
and the Lender have agreed to enter into this Ninth Modification Agreement for
the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, increasing
the Commitment amount of the Revolving Credit Loan from the existing Commitment
amount of "$6,000,000.00" to a new, increased Commitment amount of
"$8,500,000.00"; (ii) in Article I, Section 1.1 of the Loan Agreement, amending
and modifying the definition of "Loan Documents" to provide for the Ninth
Allonge and this Ninth Modification Agreement; (iii) in Article I, Section 1.1
of the Loan Agreement, providing for the new definitions of "Ninth Allonge" and
"Ninth Modification Agreement"; (iv) in the Loan Documents, providing that any
and all references to the "Revolving Note" shall be deemed to refer to the
Revolving Note as amended and modified up through and including the Ninth
Allonge; and (v) in the Loan Documents, providing that any and all references to
the "Loan Agreement" shall be deemed to refer to the Loan Agreement as amended
and modified up through and including this Ninth Modification Agreement; and
WHEREAS, all words and terms not defined here shall have the meaning as
contained in the Loan Agreement, as amended and modified up through and
including the Eighth Modification Agreement; and
WHEREAS, the aforesaid Revolving Note, the Loan Agreement, the Corporate
Guaranty, the Assignment #1, the Assignment #2, the Extension Agreement #1, the
Extension Agreement #2, the Extension Agreement #3, the Extension Agreement #4,
the First Allonge, the First Modification Agreement, the Second Allonge, the
Second Modification Agreement, the Third Allonge, the Third Modification
Agreement, the Fourth Allonge, the Fourth Modification Agreement, the Fifth
Allonge, the Fifth Modification Agreement, the Sixth Allonge, the Sixth
Modification Agreement, the Seventh Allonge, the Seventh Modification Agreement,
the Eighth Allonge, the Eighth Modification Agreement, the Ninth Allonge, this
Ninth Modification Agreement and any and all of the documents, agreements,
certificates and instruments executed in connection herewith shall be
hereinafter collectively referred to as the "Loan Documents"; and
10
<PAGE>
NOW, THEREFORE, in consideration of these premises and the mutual
representations, covenants and agreements of the Borrower, the Corporate
Guarantors and the Lender, each party binding itself and its successors and
assigns does hereby promise, covenant and agree as follows:
1. There is, as of April 28,1999, presently due and owing on the Revolving
Note the principal sum $4,300,000.15, without defense, offset or counterclaim,
all of which are hereby expressly waived by the Borrower and the Corporate
Guarantors as of the date hereof. The foregoing principal balance is allocated
as follows: (a) $4,300,000.15 for outstanding Advances of direct loans under the
Note and (b) $0 for Letters of Credit.
2. By execution hereof, the Borrower and the Corporate Guarantors
acknowledge and agree that the Lender's consent to enter into this Ninth
Modification Agreement is contingent upon the following:
(a) the payment by the Borrower of all costs, expenses and fees of the
transaction contemplated by this Ninth Modification Agreement, including,
but not limited to (i) all search costs and expenses, (ii) all fees and
expenses of the Lender's attorneys and (iii) all accrued and unpaid
interest up to and including the date hereof; and
(b) the continued delivery by the Borrower to the Lender of copies of
all valid insurance certificates with respect to worker's compensation,
general liability, umbrella liability and other insurance required pursuant
to the Loan Agreement, as previously amended and modified, all of which
name the Lender as lender and/or loss payee with respect to Accounts
Receivable, Inventory, Equipment and other corporate assets.
3. To the best of the Borrower's and each Corporate Guarantor's knowledge,
the Borrower and each Corporate Guarantor hereby represent that the lien on the
Collateral granted to the Lender under the Loan Agreement, as amended and
modified up through and including this Ninth Modification Agreement, continue to
be valid and enforceable first lien on the Collateral.
4. The Loan Agreement, as previously amended and modified, is hereby
further amended and modified, as follows:
(a) Article I, Section 1.1 shall be amended and modified as follows:
(i) Subsection (m) shall be amended and modified by deleting the
existing Commitment amount of "Six Million and 00/100 ($6,000,000.00)
Dollars" and inserting a new increased Commitment amount of "Eight
Million Five Hundred Thousand and 00/100 ($8,500,000.00) Dollars" in
its place and stead.
(ii) Subsection (cc) shall be amended and modified by inserting a
reference to "Ninth Allonge" and "Ninth Modification Agreement".
11
<PAGE>
(iii) The following new definitions shall be inserted:
""Ninth Allonge" shall mean that certain Ninth Allonge to
$4,000,000.00 Revolving Note Dated February 20, 1991 dated as of
May 10th, 1999 pursuant to which the Borrower and the Lender
agreed to further amend and modify the terms of the Note for the
purposes of amending and modifying the aggregate principal amount
of the loan from the then existing aggregate principal amount of
"$6,000,000.00" to a new, increased aggregate principal amount of
"$8,500,000.00"."
""Ninth Modification Agreement" shall mean that certain Ninth
Amendment and Modification Agreement dated as of May 10th, 1999,
pursuant to which the Borrower, the Corporate Guarantors and the
Lender agreed to further amend and modify the terms of this
Agreement and the other Loan Documents, all as previously amended
and modified for the purposes of (i) in Article I, Section 1.1 of
this Agreement, increasing the Commitment amount from the then
existing Commitment amount of "$6,000,000.00" to a new, increased
Commitment amount of "$8,500,000.00"; (ii) in Article I, Section
1.1 of this Agreement, amending and modifying the definition of
"Loan Documents" to provide for the Ninth Allonge and the Ninth
Modification Agreement; (iii) in Article I, Section 1.1 of this
Agreement, providing for the new definitions of "Ninth Allonge"
and "Ninth Modification Agreement"; (iv) in the Loan Documents,
providing that any and all references to the "Note" shall be
deemed to refer to the Note as amended and modified up through
and including the Ninth Allonge; and (v) in the Loan Documents,
providing that any and all references to the "Loan Agreement"
shall be deemed to refer to the Loan Agreement as amended and
modified up through and including the Ninth Modification
Agreement."
5. The Loan Documents, as previously amended and modified, are hereby
further amended and modified as follows:
(a) Any and all references to the existing Commitment amount of "Six
Million and 00/100 ($6,000,000.00) Dollars" shall be deleted and the new
increased Commitment amount of "Eight Million Five Hundred Thousand and
00/100 ($8,500,000.00) Dollars" shall be inserted in their place and stead.
(b) Any and all references to the "Revolving Note" shall be deemed to
refer to the Revolving Note as amended and modified up through and
including the Ninth Allonge.
(c) Any and all references to the "Loan Agreement" shall be deemed to
refer to the Loan Agreement as amended and modified up through and
including this Ninth Modification Agreement.
12
<PAGE>
6. To the best of the Borrower's and each of the Corporate Guarantors'
knowledge, all representations and warranties contained in the Loan Documents,
as amended and modified through this Ninth Modification Agreement are true,
accurate and complete as of the date hereof and shall be deemed continuing
representations and warranties so long as the Revolving Credit Loan shall remain
outstanding.
7. The Borrower and the Corporate Guarantors expressly confirm and affirm
that the Corporate Guaranty remains in full force and effect as a continuing
guaranty of the full, prompt and unconditional payment of all present and future
obligations and/or liabilities of any kind of the Borrower due and owing to the
Lender, including, without limitation, the repayment in full of the Revolving
Credit Loan.
8. All other terms and conditions of the Loan Documents, as amended and
modified through this Ninth Modification Agreement, remain in full force and
effect, except as amended and modified herein, and the parties hereto hereby
expressly confirm and reaffirm all of their respective liabilities, obligations,
duties and responsibilities under and pursuant to said Loan Documents,
including, without limitation, the obligations of the Corporate Guarantors under
the Corporate Guaranty, as amended and modified by this Ninth Modification
Agreement.
9. It is the intention of the parties hereto that this Ninth Modification
Agreement shall not constitute a novation and shall in no way adversely affect
or impair the lien priority of the Loan Documents. In the event this Ninth
Modification Agreement, or any portion hereof in any of the instruments executed
in connection herewith shall be construed or shall operate to affect the lien
priority of the Loan Documents, then to the extent such instrument creates a
charge upon the Loan Documents in excess of that contemplated and permitted
thereby, and to the extent third parties acquiring an interest in the Loan
Documents between the time of recording of the Loan Documents and the recording
of this Ninth Modification Agreement are prejudiced hereby, if any, this Ninth
Modification Agreement shall be void and of no force and effect; provided,
however, that notwithstanding the foregoing, the parties hereto, as between
themselves, shall be bound by all terms and conditions hereof until all
indebtedness evidenced by the Revolving Note shall have been paid in full and
the Revolving Credit Loan terminated.
10. The Borrower and the Corporate Guarantors do hereby:
(a) ratify, confirm and acknowledge that, as amended and modified
hereby, the Loan Documents continue to be valid, binding and in full force
and effect;
(b) covenant and agree to perform all of their respective obligations
contained in the Loan Documents, as amended and modified hereby;
(c) represent and warrant that, after giving effect to the
transactions contemplated by this Ninth Modification Agreement, no "Event
of Default" (as such term is defined in the Loan Agreement), exists or will
exist upon the delivery of notice, passage of time, or both;
13
<PAGE>
(d) acknowledge and agree that nothing contained herein and no actions
taken pursuant to the terms hereof are intended to constitute a novation of
the Revolving Note or of the Revolving Credit Loan, or any waiver of any of
the other Loan Documents, and do not constitute a release, termination or
waiver of any of the liens, security interests or rights or remedies
granted to the Lender under the Loan Documents, all of which liens,
security interests, rights or remedies are hereby ratified, confirmed and
continued as security for the Revolving Credit Loan, as amended and
modified hereby; and
(e) acknowledge and agree that the failure by the Borrower and/or the
Corporate Guarantors to comply with or perform any of their respective
covenants, agreements or obligations contained herein shall constitute an
Event of Default under the Loan Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Ninth Modification
Agreement to be duly executed, sealed and attested and/or witnessed, as
appropriated, and delivered, all as of the day and year first above written.
[SEAL] JOULE, INC., a Delaware
ATTEST: corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
[SEAL] JOULE MAINTENANCE
ATTEST: CORPORATION, a New Jersey
corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
[SEAL] JOULE TECHNICAL
ATTEST: SERVICES, INC., a New Jersey
corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
[SEAL] JOULE TECHNICAL
ATTEST: STAFFING, INC., a New Jersey
corporation
By:
- ----------------------------- -----------------------------
Bernard G. Clarkin Emanuel N. Logothetis
Secretary Chairman
SUMMIT BANK
By:
-----------------------------
John F. Hurley
Vice President
15
<PAGE>
STATE OF NEW JERSEY :
: ss.
COUNTY OF MIDDLESEX :
BE IT REMEMBERED, that on this ____ day of ________, 1999, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgments for use in the State of New Jersey, personally appeared John F.
Hurley, who, I am satisfied is the person who executed the within Instrument, as
the Vice President of Summit Bank, the corporation named therein, and I having
first made know to her the contents thereof, she did thereupon acknowledge that
the said Instrument made by the said corporation and sealed with its corporate
seal and delivered by her as such officer, is the voluntary act and deed of said
corporation, made by virtue of authority from its Board of Directors, for the
uses and purposes therein expressed.
Notary Public of the State of New Jersey
STATE OF NEW JERSEY :
: ss.
COUNTY OF MORRIS :
BE IT REMEMBERED, that on this ____ day of _________, 1999, before me, the
subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take
acknowledgments for use in the State of New Jersey, personally appeared Emanuel
N. Logothetis, who, I am satisfied is the person who executed the within
Instrument, as the Chairman of Joule, Inc., Joule Maintenance Corporation, Joule
Technical Services, Inc. and Joule Technical Staffing, Inc., the corporations
named therein, and I having first made know to him the contents thereof, he did
thereupon acknowledge that the said Instrument made by said corporations and
sealed with their corporate seals and delivered by him as such officer, is the
voluntary act and deed of said corporations, made by virtue of authority from
their respective Boards of Directors, for the uses and purposes therein
expressed.
Notary Public of the State of New Jersey
One Company-Three Specialties
Annual Report 1999
[LOGO]JOULE
<PAGE>
selected financial information
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------------
1999 1998 1997 1996 1995
===============================================
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues ............................. $68,153 $55,301 $48,590 $48,449 $43,641
Net Income ........................... 720 706 1,066 1,026 938
Net Income Per Share Basic and Diluted 0.20 0.19 0.29 0.28 0.26
Total Assets ......................... 18,376 12,913 10,843 10,809 10,802
Long-Term Debt ....................... -- 381 406 431 456
===============================================
</TABLE>
- --------------------------------------------------------------------------------
Specialties Commercial
Services ranging from professional, administrative, clerical, customer service
and light industrial staffing to work force management solutions.
Professional Accounting, financial, human resources and sales staff.
Administrative Office automation support, customer service personnel, general
clerical and incoming call support.
Light
Industrial Assembly line/production personnel, freight forwarding handlers,
equipment operators, and production supervision.
- --------------------------------------------------------------------------------
Technical
Offers traditional staffing as well as single source management programs in
three core disciplines: Engineering, Scientific and Information Technology.
Engineering Engineers, architects, designers, CAD operators, inspectors,
planners.
Scientific Chemists, biologists, clinical research associates, lab
technicians, food scientists, chemical operators, statistical
programmers, clinical data coordinators.
Information
Technology Programmers, system analysts, network engineers, PC techs,
computer operators, database administrators, database
analysts.
- --------------------------------------------------------------------------------
Industrial
On demand, project and work force management solutions of craft skilled
personnel.
Industrial Electrician, welder, millwright, mechanical machinist, mason,
rigger, fitter specialist and other trade specialists.
Project
Solutions Nationwide refurbishing and refitting support of industrial
facilities.
Outsourcing Multi-year technical maintenance support contracts for
industrial or manufacturing clients.
Revenue
(In Millions of $)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 $43.6
1996 48.5
1997 48.6
1998 55.3
1999 68.7
<PAGE>
1999 significant
accomplishments
Growth and Expansion--Strategic Advances AND Continuous Improvements
o Joule's Technical Staffing now has branch locations in the Southeastern and
South Central United States due to Joule's successful Strategic Acquisition
of Ideal Technical Services in May 1999.
o Ideal Technical added over $3 million in revenue to Joule's results in
1999.
o Joule's revenues, without Ideal's revenue, rose over 17%, from $55.3
million to $64.8 million--ALL Joule Business Segments generated increased
revenues in 1999!
o The quality of Joule's revenue improved. Gross Margin increased from 18.1%
of sales in 1998 to 18.5% of sales in 1999.
o Joule's Commercial Staffing enhanced by inaugurating Joule PROfessional as
a further extension to its service offerings--providing financial, human
resources and sales professionals to our clients.
o Added 5 new branch locations to Joule's organization in 1999--30% growth in
market penetration.
o Joule's Industrial Staffing supported clients in 39 states, Canada and
Puerto Rico in 1999.
- --------------------------------------------------------------------------------
Vision Statement
...Joule is a publicly owned American Stock Exchange staffing services company,
founded over 30 years ago, that specializes in changing the "fixed overhead" of
Fortune 500 companies into "variable overhead" through outsourcing of non-core
staffing needs.
Outsourcing allows a company to turn over various support positions to
specialized outside vendors so that it can concentrate on building and managing
its core business. At the same time it enjoys the benefit of a more variable
cost structure along with improved quality since the outsourcing vendor must be
competitive as well as specialized in its field. Today's global economy demands
that companies constantly strive to become more efficient and flexible in order
to survive and prosper.
Joule accomplishes this by supplying thousands of employees each year to
its customers who are billed on an hourly basis. The staffing services business
markets through its branches, using the trademarks "Joule Staffing Services,"
"Joule PROfessional," "Joule Technical Staffing Services," "Ideal Technical
Services" and "Joule Industrial Services."
Joule's specialized approach in providing staffing solutions greatly
enhances its value and effectiveness in the present competitive environment.
As companies have re-engineered their operations, market opportunities have
continued to develop for Joule. More and more companies in an increasing number
of industries are seeking the advantages of outsourced staffing, thereby
improving the quality of their support services while also better controlling
their costs. Joule believes this trend toward outsourcing will continue to
offer excellent growth opportunities for it in the future.
- --------------------------------------------------------------------------------
Geographic Growth--States with Joule Branch Locations
at the beginning of Fiscal 1997 by the end of Fiscal 1999
[MAP] [MAP]
1
<PAGE>
Dear
Shareholders:
1999 was a Milestone Year for Joule Inc. We reached record levels in sales
for the eighth consecutive year, increasing sales to over $68 million. We
expanded our branch organization both in New Jersey and in neighboring states.
We completed our first strategic acquisition, establishing Joule's presence in
Southeastern and South Central United States. We added new service offerings
that are focused on even higher levels of client value and profitability in each
of our business segments.
Continued Strong Performance
For the eighth consecutive year the Company increased its revenues. Sales for
Fiscal 1999 were $68.2 million compared to 1998's $55.3 million, an increase of
$12.9 million, or 23.2%. This is exceptional when compared to only 5.2% revenue
growth rate for the Temporary Personnel Industry nationally, comparing 1999 to
1998, according to the American Staffing Association.
Joule's Gross Margin improved from 18.1% in 1998 to 18.5% in 1999, directly
resulting from the Company's efforts to increase its margins in direct
relationship to the higher levels of service being offered to our clients.
Lastly, despite the requirement to recognize the special reserve of $500,000
related to the bankruptcy of a customer, Joule increased its earnings per share
from 19 cents in 1998 to 20 cents in 1999.
Successful Service Expansions
In 1999 Joule succeeded in achieving our primary business objective: Positive
Expansion of our Business. All business segments grew in terms of revenue,
geographic markets and service offerings to our clients.
May 1999's strategic acquisition of Ideal Technical Services significantly
increased Joule's Technical Staffing Business Segment with a strong team of
professional sales and technical recruiters and a dynamic new geographic
marketplace for Joule.
Joule's Industrial Business Segment continued to increase revenues and expand
its client relationships on a nationwide basis, providing services in 39 states,
Canada and Puerto Rico during 1999.
Joule's Commercial Staffing Business Segment added new offices in New Jersey as
well as entering Maryland and Delaware in 1999. Furthermore, Commercial Staffing
established a new service program--Joule PROfessional--specializing in supplying
financial, sales and human resources staff to our New Jersey clients from its
Edison, New Jersey location.
[PHOTO]
Joule's Senior Management Team
Left to Right--Front Row: Bernard G. Clarkin, E.N. Logothetis, John G. Wellman,
Jr.
Left to Right--Back Row: Joseph E. Vendetti, Anthony W. Trotter, Stephen
Demanovich, John F. Logothetis, John Porch
Joule's Senior Management Team
Joule's Senior Management Team is committed to establish a strong organizational
foundation. Joule's expansions have created opportunities to invest in managers
and staff members at all levels of our organization who are dedicated to service
and success. Our Senior Management's experience and skills are providing
positive and dynamic leadership to support our strategy of operating
independently three separate business concentrations under the Joule name,
allowing each segment the freedom to specialize and excel.
Looking Ahead
Joule's Management Team is dedicated to building a vibrant, exciting Company
that is successfully addressing the challenges of the marketplace. As we begin
2000, Joule's financial condition is exceptionally strong. We are focused on
being the BEST in each of our three specialties. Because of our Fiscal 1999,
Joule is entering the new century with confidence and optimism.
/s/ Emanuel N. Logothetis /s/ John G. Wellman, Jr.
Emanuel N. Logothetis John G. Wellman, Jr.
Chairman and Chief Executive Officer President and Chief Operating Officer
2
<PAGE>
A Joule Specialty
commercial
staffing
Joule's Commercial Staffing continues to meet our client's growing staffing
needs by expanding our network of branch locations, markets and services. In
1999 we added Wilmington, Delaware and Baltimore, Maryland as new markets and
opened several additional branch locations in New Jersey. With the establishment
of Joule PROfessional in 1999 Joule now offers financial, human resources and
sales staffing solutions to our clients from our Edison, New Jersey location.
Entering 2000 Joule can serve the entire spectrum of clerical, light industrial
and corporate support staff requirements. As the economy continues to
strengthen, our professional recruiting and client support programs, with
innovative services such as Joule's transportation services, make Joule THE
solution to our clients' temporary staffing requirements.
Revenue
(In Millions of $)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 $13.6
1996 15.0
1997 18.5
1998 20.4
1999 26.1
- --------------------------------------------------------------------------------
SITUATION: SIGNIFICANT NEW BUSINESS INVESTMENT HAS TAKEN PLACE IN NEW JERSEY'S
RURAL AREA, ALONG ITS INTERSTATE HIGHWAYS, DISTANT FROM NEW JERSEY'S POPULATED
URBAN AREAS.
[PHOTO]
JOULE'S RESPONSE: COMMERCIAL STAFFING OPERATES THE INDUSTRY'S LARGEST
FLEET IN NEW JERSEY OF STATE-LICENSED 15-PASSENGER VANS TO TRANSPORT
STAFF FROM ITS URBAN RECRUITING OFFICES TO ITS CLIENTS.
Quality, Reliable Staff for Critical Needs!
3
<PAGE>
A Joule Specialty
technical
staffing
Joule's Technical Staffing achieved record sales and earnings for the fifth
consecutive year. During the 1999 period, we continued to build upon our
reputation for offering our clients high-quality staffing solutions for
technical personnel in the Engineering, Science and Information Technology
disciplines. Our strategy of "partnering" with our clients coupled with very
specific candidate recruitment and selection strategies contributed greatly to
our positive results. We continue to invest in technology to enhance staff
productivity and we utilize internet recruitment and marketing initiatives to
better serve our clients and facilitate our expansion into new niche markets.
One major highlight of 1999 was the acquisition of Ideal Technical Services.
This significant addition immediately expanded our Engineering presence in the
Southeastern and South Central U.S. and provides us with a solid platform for
continued national expansion. We fully expect that the addition of Ideal
Technical Services and our continued dedication to quality and customer service
will provide an exceptional foundation for sales and organizational growth in
the future.
Revenue
(In Millions of $)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 $ 8.8
1996 11.6
1997 13.1
1998 16.5
1999 20.2
- --------------------------------------------------------------------------------
SITUATION: JOULE HAD DEVELOPED A STRONG PRESENCE IN SCIENTIFIC STAFFING WITH NEW
JERSEY'S POSITION AS THE GLOBAL LEADER OF THE PHARMACEUTICAL INDUSTRY, BUT
NEEDED A STRONGER POSITION IN ENGINEERING STAFFING ON A NATIONAL SCALE.
[PHOTO]
JOULE'S RESPONSE: JOULE ACQUIRED THE OPERATIONS OF IDEAL TECHNICAL
SERVICES IN 1999 (JOULE'S FIRST MAJOR ACQUISITION), AN ESTABLISHED
ENGINEERING STAFFING FIRM ON THE GULF COAST AND SOUTHEASTERN UNITED
STATES.
4
<PAGE>
A Joule Specialty
industrial
staffing
Joule's Industrial Staffing is a leading regional and national provider of
skilled craft workers and project support services necessary for the
installation or retrofitting of equipment and facilities. Clients are searching
for quality, skilled craftworkers, on-site leadership and logistical support
from one source, and Joule is recognized as their preferred solution. To provide
high-quality solutions to our clients, Joule invests heavily in every facet of
our business, including safety, training, recruiting and project management and
support. In 1999 Industrial Staffing added a national recruiting program which
expanded significantly Joule's available skilled craft labor resources,
mobilizing personnel from all over the country for client projects. Client
satisfaction with Joule has been so positive, that many have outsourced their
facilities management requirements to Joule on annual and multi-year
relationships. We continue to offer our clients an expanding range of solutions,
delivered with attention to quality and service.
Revenue
(In Millions of $)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 $21.2
1996 21.9
1997 17.0
1998 18.4
1999 21.8
- --------------------------------------------------------------------------------
SITUATION: A JOULE CLIENT IN NEW JERSEY IS RELOCATING TO A MAJOR METROPOLITAN
AREA IN THE SOUTH DURING 1999, AND THEY REQUIRE A QUALIFIED FACILITIES
CONTRACTOR TO SUPPORT AND MANAGE THEIR NEW 1 MILLION SQUARE FOOT PLANT.
[PHOTO]
JOULE'S RESPONSE: INDUSTRIAL STAFFING PROVIDED STAFF, MANAGEMENT AND
LOGISTICAL SUPPORT TO ENSURE A POSITIVE RELOCATION OF THE OLD
FACILITY, START-UP OF THE NEW FACILITY AND ONGOING FACILITIES
MANAGEMENT OF THE NEW PLANT AFTERWARDS. THE NEW FACILITY WAS IN FULL
PRODUCTION AND FULLY SUPPORTED WITHIN THE ONE MONTH SCHEDULED
START-UP. JOULE PROVIDED A SUCCESSFUL SOLUTION TO ITS CLIENT ON A
NATIONAL SCALE.
5
<PAGE>
Joule Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
The following table sets forth the percentage relationship of certain items
in the Company's consolidated statements of income:
Year Ended September 30,
------------------------------
1999 1998 1997
==============================
Revenues ................................... 100.0% 100.0% 100.0%
Costs, expenses and other
Cost of services ......................... 81.5 81.9 81.3
Selling, general and
administrative expenses .............. 16.3 15.6 14.6
Interest expense ......................... 0.5 0.4 0.4
Income before income tax provision ......... 1.7 2.1 3.7
Income tax provision ....................... 0.6 0.8 1.5
Net income ................................. 1.1 1.3 2.2
The Company's revenues are derived from providing staffing services to its
customers. Such services include providing commercial (office and light
industrial) workers, technical (engineering, scientific and information
technology) personnel, and industrial (skilled craft industrial plant and
facility maintenance) labor. Approximately 95% of revenue is billed on a direct
cost plus markup basis. Revenue increased 23% to $68.2 million in fiscal 1999
from $55.3 million in 1998. This followed a 14% increase in revenue in 1998 from
a 1997 level of $48.6 million. Commercial staffing revenue increased 28% to
$26.1 million in 1999 from $20.4 million in 1998, following a 10% increase in
1998 over 1997 revenue of $18.5 million. Technical staffing revenue, including
$3.4 million related to the acquisition of Ideal Technical Services (Ideal),
increased 22% to $20.2 million in 1999, compared to 1998 revenue of $16.5
million. Revenue increased 26% during 1998 over 1997 revenue of $13.1 million.
Industrial staffing revenue in 1999 amounted to $21.8 million, an 18% increase
over 1998 revenue of $18.4 million, which 1998 revenue reflected an 8% increase
over 1997 revenue of $17.0 million.
Cost of services were 81.5%, 81.9% and 81.3% of revenue in fiscal 1999,
1998 and 1997, respectively. These expenses consist primarily of compensation to
employees on assignment to clients and related costs, including social security,
unemployment taxes, general liability and workers' compensation insurance, and
other costs of services, including a van transportation service which transports
some commercial staffing workers to job sites. Selling, general and
administrative expenses amounted to $11.1 million in 1999, compared to $8.6
million in 1998 and $7.1 million in 1997. Such expenses were 16.3%, 15.6% and
14.6% of revenues in 1999, 1998 and 1997, respectively. The 1999 and 1998
increases in selling, general and administrative expenses principally reflect
higher staff employee payroll related expenses reflecting the Company's
investment in new staff in order to grow the business, and in 1999, includes a
special one-time pre-tax charge of $500,000 taken to establish a reserve related
to the fourth quarter bankruptcy of a Commercial Staffing customer. Selling,
general and administrative expenses also include advertising, professional fees,
depreciation and amortization, provision for the allowance for doubtful
accounts, rent, and other costs related to maintaining the Company's branch
offices. Selling, general and administrative expenses included a provision for a
legal settlement and related costs amounting to $323,000 in 1998 related to the
Company's decision to settle a lawsuit. While the Company felt that the lawsuit
was without merit, it settled to contain legal expenses. The aforementioned two
charges, net of taxes, for the bankruptcy and the legal settlement and related
costs, reduced earnings per share by $.08 and $.05 in 1999 and 1998,
respectively.
Interest expense in 1999 increased to $348,000 from $250,000 in 1998 and
$214,000 in 1997 reflecting an increase in average borrowings to support the
Company's continuing growth, including the Ideal acquisition. After giving
effect to the utilization of certain tax credits, the effective tax rate for
1999 was 36%. Effective tax rates for fiscal 1998 and 1997 were 40%. As a result
of the above, net income was $720,000 or $0.20 per share basic and diluted in
1999 compared with $706,000 or $0.19 per share basic and diluted in 1998 and
$1,066,000 or $0.29 per share basic and diluted in 1997.
Liquidity and Capital Resources
Current assets at September 30, 1999 were $12,974,000 as compared to
$9,125,000 at September 30, 1998 and current liabilities were $10,753,000
compared to $5,640,000 as of September 30, 1998. Employees typically are paid on
a weekly basis. Clients generally are billed on a weekly basis. The Company has
generally utilized bank borrowings to meet its working capital needs. As of
September 30, 1999, the Company had a $8,500,000 bank line of credit; loans
thereunder are secured principally by receivables with interest at LIBOR plus
one and one-half percent with a prime rate less one-quarter percent option;
$7,700,000 was outstanding under this line as of September 30, 1999. In November
1999, this line was increased to $9,000,000.
The Company believes that internally generated funds and available
borrowings will provide sufficient cash flow to meet its requirements for the
next 12 months.
Year 2000 Compliance
The Company is a staffing company that provides employees to its customers.
There is no inventory or production facility involved in providing these
services. Computer systems are used to track employee availability, to generate
and track sales, and for accounting purposes, including payroll and billing. All
of the Company's systems and hardware were purchased in recent years. The
Company has been assured by its providers that they are all Year 2000 compliant
and has also tested the systems to confirm this. The Company will continue to
test its existing and new hardware and software for Year 2000 compliance. The
financial impact of insuring Year 2000 compliance is not expected to be material
to the Company's financial condition.
Forward-Looking Information
Certain parts of this document include forward-looking statements within
the meaning of the federal securities laws that are subject to risks and
uncertainties. Factors that could cause the Company's actual results and
financial condition to differ from the Company's expectations include, but are
not limited to, a change in economic conditions that adversely affects the level
of demand for the Company's services, competitive market and pricing pressures,
the availability of qualified temporary workers, the ability of the Company to
manage growth through improved information systems and the training and
retention of new staff, and government regulation.
6
<PAGE>
Joule Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
-------------------------
1999 1998
=========================
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ................................................................... $ 152,000 $ 233,000
Accounts receivable, less allowance for doubtful accounts of
$384,000 and $267,000 in 1999 and 1998, respectively ............... 12,680,000 8,549,000
Prepaid expenses and other current assets .............................. 142,000 343,000
-------------------------
Total Current Assets ............................................. 12,974,000 9,125,000
PROPERTY AND EQUIPMENT, NET .............................................. 4,092,000 3,707,000
GOODWILL ................................................................. 1,285,000 60,000
OTHER ASSETS ............................................................. 25,000 21,000
-------------------------
$18,376,000 $12,913,000
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable to bank .................................................. $ 7,700,000 $ 3,100,000
Accounts payable and accrued expenses .................................. 1,436,000 682,000
Accrued payroll and related taxes ...................................... 1,489,000 1,833,000
Income taxes ........................................................... 128,000 --
Current portion of long-term debt ...................................... -- 25,000
-------------------------
Total Current Liabilities ........................................ 10,753,000 5,640,000
-------------------------
LONG-TERM DEBT ........................................................... -- 381,000
-------------------------
Total Liabilities ................................................ 10,753,000 6,021,000
-------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized 500,000 shares, none outstanding .......................... -- --
Common stock, $.01 par value:
Authorized 10,000,000 shares--issued 3,820,000 and 3,816,000 shares in
1999 and 1998, respectively ....................................... 38,000 38,000
Additional paid-in capital ............................................. 3,669,000 3,658,000
Retained earnings ...................................................... 4,305,000 3,585,000
-------------------------
8,012,000 7,281,000
LESS: Cost of 146,000 shares of common stock held in treasury ............ 389,000 389,000
-------------------------
Total Stockholders' Equity ....................................... 7,623,000 6,892,000
-------------------------
$18,376,000 $12,913,000
=========================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
Joule Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------
1999 1998 1997
=======================================
<S> <C> <C> <C>
REVENUES ........................................ $68,153,000 $55,301,000 $48,590,000
---------------------------------------
COSTS, EXPENSES, AND OTHER:
Cost of services .............................. 55,548,000 45,273,000 39,485,000
Selling, general and administrative expenses .. 11,120,000 8,585,000 7,113,000
Interest expense .............................. 348,000 250,000 214,000
Other ......................................... 10,000 17,000 2,000
---------------------------------------
Income before income tax provision .............. 1,127,000 1,176,000 1,776,000
Income tax provision (Note 5) ................... 407,000 470,000 710,000
---------------------------------------
Net income ...................................... $ 720,000 $ 706,000 $ 1,066,000
=======================================
Basic and diluted earnings per share ............ $ 0.20 $ 0.19 $ 0.29
=======================================
Weighted average common shares outstanding--basic 3,673,000 3,670,000 3,664,000
Weighted average common shares and common
equivalents outstanding--diluted .............. 3,673,000 3,672,000 3,666,000
=======================================
</TABLE>
See accompanying notes to consolidated financial statements.
Joule Inc. and Subsidiaries
Consolidated Statements of
Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Shares of Additional
Common Common Paid-In Retained Treasury
Stock Stock Capital Earnings Stock
==================================================================================
<S> <C> <C> <C> <C> <C>
Balances, September 30, 1996 ...... 3,811,000 $ 38,000 $3,637,000 $1,813,000 $ (389,000)
Net Income ...................... -- -- -- 1,066,000 --
Exercise of Stock Options ....... 5,000 -- 21,000 -- --
----------------------------------------------------------------------------------
Balances, September 30, 1997 ...... 3,816,000 38,000 3,658,000 2,879,000 (389,000)
Net Income ...................... -- -- -- 706,000 --
----------------------------------------------------------------------------------
Balances, September 30, 1998 ...... 3,816,000 38,000 3,658,000 3,585,000 (389,000)
Net Income ...................... -- -- -- 720,000 --
Exercise of Stock Options ....... 4,000 -- 11,000 -- --
----------------------------------------------------------------------------------
Balances, September 30, 1999 ...... 3,820,000 $ 38,000 $3,669,000 $4,305,000 $ (389,000)
==================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
Joule Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------------------
1999 1998 1997
================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................. $ 720,000 $ 706,000 $ 1,066,000
Adjustments to reconcile net income to net
cash flows (used in) provided by operating activities:
Depreciation and amortization .......................................... 703,000 558,000 453,000
Provision for losses on accounts receivable ............................ 778,000 93,000 87,000
Changes in operating assets and liabilities:
Accounts receivable .................................................. (4,909,000) (1,822,000) (231,000)
Prepaid expenses and other assets .................................... 116,000 (203,000) 206,000
Accounts payable and accrued expenses ................................ 750,000 (790,000) (642,000)
Accrued payroll and related taxes .................................... (404,000) 542,000 197,000
Income taxes ......................................................... 204,000 (168,000) 168,000
------------------------------------------------
Net cash flows (used in) provided by operating activities .......... (2,042,000) (1,084,000) 1,304,000
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment ..................................... (870,000) (602,000) (288,000)
Acquisition of a business .................................................. (1,374,000) -- --
------------------------------------------------
Net cash flows used in investing activities ........................ (2,244,000) (602,000) (288,000)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in loans payable to bank ............................... 4,600,000 1,805,000 (1,048,000)
Payment of long-term debt .................................................. (406,000) (25,000) (25,000)
Proceeds from exercise of stock options .................................... 11,000 -- 21,000
------------------------------------------------
Net cash flows provided by (used in) financing activities .......... 4,205,000 1,780,000 (1,052,000)
------------------------------------------------
NET CHANGE IN CASH ........................................................... (81,000) 94,000 (36,000)
CASH, BEGINNING OF PERIOD .................................................... 233,000 139,000 175,000
------------------------------------------------
CASH, END OF PERIOD .......................................................... $ 152,000 $ 233,000 $ 139,000
================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .............................................................. $ 319,000 $ 244,000 $ 223,000
================================================
Income taxes paid .......................................................... $ 206,000 $ 714,000 $ 374,000
================================================
NON-CASH TRANSACTIONS:
During 1997, the Company acquired land and buildings in settlement of a $1,750,000 receivable.
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
Joule Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1---Summary of Significant Accounting Policies:
Basis of Presentation--The consolidated financial statements include the
accounts of JOULE INC. and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
Use of Estimates--The preparation of accrual basis financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Property and Equipment--Property and equipment are stated at cost.
Depreciation has been provided primarily by the straight-line method, at rates
based upon estimated useful lives of 3 to 5 years for automotive equipment and 5
to 10 years for machinery, equipment, furniture and fixtures. Improvements to
leasehold property are amortized on the straight-line method over the remaining
lease term or the useful lives of related property, whichever is shorter.
Buildings are depreciated over 30 years.
Revenue Recognition--Revenue is recorded when services are rendered.
Income Taxes--The Company accounts for income taxes pursuant to the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" which utilizes the liability method and results in the
determination of deferred taxes based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates currently in effect.
Earnings Per Share--Statement of Financial Accounting Standards No. 128,
"Earnings per Share," establishes new standards for computing and presenting
earnings per share (EPS). The standard requires the presentation of basic EPS
and diluted EPS.
Basic EPS is calculated by dividing income available to common shareholders
by the weighted average number of shares of common stock outstanding during the
period. Income available to common shareholders used in determining basic EPS
was $720,000 in 1999, $706,000 in 1998, and $1,066,000 in 1997. The weighted
average number of shares of common stock used in determining basic EPS was
3,673,000 in 1999, 3,670,000 in 1998, and 3,664,000 in 1997.
Diluted EPS is calculated by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding plus additional common shares that could be issued in connection
with potentially dilutive securities. The weighted average number of shares of
common stock used in determining diluted EPS was 3,673,000 in 1999, 3,672,000 in
1998, and 3,666,000 in 1997 and reflects additional shares in connection with
stock option plans.
Goodwill--During 1999, the Company acquired Ideal Technical Services
("Ideal") for $1,374,000. It was accounted for as a purchase. In connection with
the acquisition, the Company recorded $1,269,000 of goodwill. Goodwill is
generally being amortized over a period of approximately twenty years.
Amortization of goodwill amounted to $44,000 in 1999, $24,000 in 1998 and
$24,000 in 1997.
Long-Lived Assets--The provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets" (SFAS
121) require, among other things, that an entity review its long-lived assets
and certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. The
Company does not believe that any impairment currently exists related to the
long-lived assets.
Note 2---Property and Equipment:
Property and equipment consists of:
September 30,
---------------------------
1999 1998
===========================
Machinery and equipment ...................... $3,264,000 $2,740,000
Furniture and fixtures ....................... 649,000 565,000
Automotive equipment ......................... 1,570,000 1,316,000
Building and leasehold improvements .......... 540,000 361,000
Buildings .................................... 1,834,000 1,834,000
Land ......................................... 671,000 671,000
---------------------------
8,528,000 7,487,000
Less: Accumulated depreciation
and amortization .......................... 4,436,000 3,780,000
---------------------------
$4,092,000 $3,707,000
===========================
Note 3---Loans Payable to Bank and Long-Term Debt:
At September 30, 1999, the Company had an annual renewable line of credit
of $8,500,000 that bears interest at LIBOR plus one and one-half percent with a
prime rate less one-quarter percent option. The average interest rate at
September 30, 1999 was 6.96%. At September 30, 1999, $800,000 of the line of
credit was unused, all of which was available for use. Related borrowings are
collateralized principally by accounts receivable. In November 1999, this line
was increased to $9,000,000.
There was a mortgage loan for $406,000 on the Company's staffing operations
building at September 30, 1998. This mortgage was repaid in April 1999.
Note 4---Stock Option Plan:
The Company's 1991 Stock Option plan provides for the grant of nonqualified
or incentive stock options covering up to an aggregate of 500,000 shares of
common stock to directors, officers, and other employees of the Company. The
exercise price cannot be less than the fair market value of the stock at the
time the options are granted. At September 30, 1999, there were 215,000 stock
options outstanding at prices ranging from $3.50 to $5.38, of which 50,000
options are exercisable. There were 4,000 stock options outstanding from a
previous stock option plan at a price of $2.63 which were exercised in 1999. In
1997, 5,000 options were exercised and, in 1998, 15,000 options were cancelled.
In 1998 and 1997, 110,000 options were granted in each year at prices ranging
from $4.00 to $5.38. There were no options granted in 1999.
10
<PAGE>
Joule Inc. and Subsidiaries
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation (SFAS 123)," permits an entity to continue to account
for employee stock-based compensation under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," or adopt a fair value based method of accounting for
such compensation. The Company has elected to continue to account for
stock-based compensation under Opinion No. 25. Accordingly, no compensation
expense has been recognized in connection with options granted. Had compensation
expense for options granted subsequent to October 1, 1995 under the Company's
stock option plans been determined based on the fair value at the date of grant
in accordance with SFAS 123, the Company's net income and net income per share
would have been as follows:
---------------------------------------------
1999 1998 1997
=============================================
Net income:
As reported ................ $ 720,000 $ 706,000 $ 1,066,000
Pro forma .................. 633,000 671,000 1,062,000
Net income per share:
As reported ................ 0.20 0.19 0.29
Pro forma .................. 0.17 0.18 0.29
=============================================
The fair value of options granted is estimated on the date of grant using
the Black-Scholes option-pricing model. The weighted average fair values of
options granted in fiscal 1998 and 1997 were $5.25 and $4.23, respectively,
based upon the following weighted average assumptions: expected volatility (50%
in 1998 and 25% in 1997), risk-free interest rate (7.5% in 1998 and 6.5% in
1997), expected life (3 years in 1998 and 1997), and expected dividend yield (0%
in 1998 and 1997). There were no options granted during 1999.
Note 5---Income Taxes:
The provision for income taxes is comprised of the following:
September 30,
----------------------------------------
1999 1998 1997
========================================
Current:
Federal ...................... $306,000 $364,000 $551,000
State and Local .............. 101,000 106,000 159,000
----------------------------------------
$407,000 $470,000 $710,000
========================================
The provision for income taxes varied from the tax computed at the U.S.
Federal statutory rates of 34% in fiscal 1999, 1998 and 1997 for the following
reasons:
September 30,
----------------------------------------
1999 1998 1997
========================================
U.S. Federal Tax at
statutory rates ................ $ 383,000 $ 400,000 $ 604,000
State income taxes, net of
Federal tax benefit ............ 68,000 70,000 106,000
Utilization of tax credits ....... (44,000) -- --
----------------------------------------
$ 407,000 $ 470,000 $ 710,000
========================================
Note 6---Commitments and Contingencies:
The Company's facilities are leased under noncancellable terms expiring
through 2002. Rent expense was $291,000, $181,000, and $286,000 for the years
ended September 30, 1999, 1998 and 1997, respectively.
Aggregate rentals for the remaining lease terms at September 30, 1999 are
as follows:
- --------------------------------------------------------------------------------
Year Ending September 30,
================================================================================
2000................................................................ 265,000
2001................................................................ 248,000
2002................................................................ 76,000
--------
$589,000
========
A provision for legal settlement and related costs amounting to $323,000 in
1998 related to the Company's decision in October 1998 to settle a lawsuit.
While the Company felt that the case was without merit, it settled to contain
legal expenses. The aforementioned amount was paid in fiscal 1999.
Note 7---Transactions with Major Stockholders and Affiliates:
The Company rented facilities from certain of its stockholders and their
affiliates for approximately $50,000, $50,000 and $199,000 for each of the years
ended September 30, 1999, 1998 and 1997. At September 30, 1999, the Company had
related lease commitments of $1,000 for the year ending September 30, 2000.
Further, in 1997 the Company entered into a three-year lease with the purchaser
of property formerly owned by an affiliate. Annual rentals under this lease
approximate $133,000. The Company subleases most of this space to the affiliate,
which reimbursed the Company approximately $115,000 per year.
The Company paid certain major stockholders Board of Director's fees of
$19,000, $15,000 and $16,000 for the years 1999, 1998 and 1997; accounts
receivable include amounts due from a stockholder of $35,000, $33,000 and
$22,000 at September 30, 1999, 1998 and 1997, respectively.
During the year ended September 30, 1997, the Company acquired land and
buildings from Kahle Engineering Corp. (Kahle), an affiliate, which the Company
had previously leased for use in its operations, in settlement of a receivable
of $1,750,000 due from Kahle. The appraised value of the property approximated
the receivable.
Note 8---Acquisition of a Business:
On May 16, 1999, the Company completed the acquisition of the principal
operating assets (excluding cash and accounts receivable) of Ideal, a staffing
company specializing in engineering and other technical services, for $1.3
million of cash. Ideal, which has offices in Mobile, Alabama and Houston, Texas,
had been a subsidiary of SkillMaster, Inc. of Houston, Texas. The purchase price
was funded by borrowings under the Company's bank credit facility with Summit
Bank (the "Bank"). The Bank increased the Company's line of credit from $6.0
million to $8.5 million in May to fund this acquisition and related working
capital requirements. Goodwill of $1,269,000 was recorded in connection with
this acquisition. Assuming this transaction had
11
<PAGE>
Joule Inc. and Subsidiaries
Notes to Consolidated Financial Statements
been completed on October 1, 1998, unaudited pro forma revenue, net income and
earnings per share for the year ended September 30, 1999 would have been
$76,598,000, $421,000 and $0.11 per share, basic and diluted; for the year ended
September 30, 1998 such amounts would have been $70,617,000, $604,000 and $0.16,
respectively.
Note 9---Segment Disclosures
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information." SFAS 131 supersedes SFAS 14, "Financial Reporting for Segments of
a Business Enterprise," replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments.
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
business by segment. The Company's reportable segments are: (1) Commercial
Staffing, (2) Technical Staffing and (3) Industrial Staffing.
Information concerning operations by operating segment is as follows (in
000's):
1999 1998 1997
==================================
Revenues
Commercial ............................ $ 26,112 $ 20,391 $ 18,480
Technical ............................. 20,214 16,466 13,113
Industrial ............................ 21,827 18,444 16,997
----------------------------------
$ 68,153 $ 55,301 $ 48,590
==================================
Income Before Tax Provision
Commercial ............................ $ 586 $ 1,160 $ 1,561
Technical ............................. 1,696 1,476 1,036
Industrial ............................ 1,993 1,165 1,299
Corporate (unallocated,
including interest) ................. (3,148) (2,625) (2,120)
----------------------------------
$ 1,127 $ 1,176 $ 1,776
==================================
Depreciation and Amortization
Commercial ............................ $ 153 $ 108 $ 59
Technical ............................. 104 59 54
Industrial ............................ 262 241 213
Corporate (unallocated) ............... 184 150 127
----------------------------------
$ 703 $ 558 $ 453
==================================
Identifiable Assets
Commercial ............................ $ 5,991 $ 4,156 $ 2,611
Technical ............................. 5,330 2,062 1,938
Industrial ............................ 4,695 3,976 3,795
Corporate (unallocated) ............... 2,360 2,719 2,499
----------------------------------
$ 18,376 $ 12,913 $ 10,843
==================================
Additions to Long-Lived Assets(1)
Commercial ............................ $ 373 $ 350 $ 58
Technical ............................. 1,508 24 15
Industrial ............................ 323 149 708
Corporate (unallocated) ............... 106 79 1,257
----------------------------------
$ 2,310 $ 602 $ 2,038
==================================
(1) Includes property and equipment and intangible asset additions.
Note 10--Selected Quarterly Financial Data (Unaudited)
A summary of quarterly financial information for fiscal 1999 and 1998 is as
follows (in 000's, except per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
================================================================================
1999:
Revenues .................. $ 15,413 $ 15,568 $ 16,919 $ 20,253
Net income ................ 358 252 281 (171)
Basic and diluted
earnings per share ...... 0.10 0.07 0.08 (0.05)
1998:
Revenues .................. $ 12,304 $ 13,646 $ 14,392 $ 14,959
Net income ................ 178 210 294 24
Basic and diluted
earnings per share ...... 0.05 0.06 0.08 0.01
Report of Independent Public Accountants
To the Stockholders and
Board of Directors of Joule Inc.
We have audited the accompanying consolidated balance sheets of Joule Inc.
(a Delaware corporation) and subsidiaries as of September 30, 1999 and 1998 and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended September 30,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Joule Inc. and subsidiaries
as of September 30, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1999 in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
November 12, 1999
12
<PAGE>
Joule Inc. and Subsidiaries
Corporate Data
Board of Directors
Richard P. Barnitt
Financial Consultant
Paul L. DeBacco
President
Michael Christopher Group. Inc.
Robert W. Howard
Chairman of the Board
Reisen Lumber Industries, Inc.
Emanuel N. Logothetis
Chairman of the Board and
Chief Executive Officer
Nick M. Logothetis
President
Chartwell Consulting Group
Steven Logothetis
Attorney
Officers
Emanuel N. Logothetis
Chairman of the Board and
Chief Executive Officer
John G. Wellman, Jr.
President and
Chief Operating Officer
Bernard G. Clarkin
Vice President, Chief Financial Officer
and Secretary
John F. Logothetis
Vice President
Stephen Demanovich
Vice President
Anthony W. Trotter
Vice President
Corporate Information
For a copy of Form 10-K or other information
about the Corporation, contact:
Investor Relations Secretary
JOULE INC.
1245 Route 1 South
Edison, New Jersey 08837
(732) 548-5444
E-mail Address: [email protected]
Or
Visit our Web Site at www.jouleinc.com
Auditors
Arthur Andersen LLP
101 Eisenhower Parkway
Roseland, New Jersey 07068
Transfer Agent & Registrar
Continental Stock Transfer & Trust Co.
2 Broadway
New York, New York 10275-0491
JOULE Common Stock is traded on
the American Stock Exchange under
the symbol JOL.
Annual Meeting
The annual meeting of JOULE Inc. will be
held on Wednesday, February 2, 2000 at
10:30 a.m., at the Pines Manor, Edison,
New Jersey.
Joule Inc. Offices
Headquarters
1245 Route 1 South
Edison, New Jersey
(732) 548-5444
Fax: (732) 494-6346
Technical Staffing Locations
Edison, New Jersey
Ideal Technical Services Locations
Mobile, Alabama
Houston, Texas
Commercial Staffing Services Locations
Edison, New Jersey
Parsippany, New Jersey
Paramus, New Jersey
Northfield, New Jersey
Trenton, New Jersey
Cherry Hill, New Jersey
Union City, New Jersey
Passaic, New Jersey
New Brunswick, New Jersey
Camden, New Jersey
Elizabeth, New Jersey
Wilmington, Delaware
Ft. Lauderdale, Florida
Baltimore, Maryland
Industrial Staffing Locations
Edison, New Jersey
Gibbstown, New Jersey
Fishkill, New York
Baltimore, Maryland
Lawrenceville, Illinois
Market for Registrant's
Common Equity and Related
Stockholder Matters
The Company's Common Stock is traded on the American Stock Exchange under
the symbol JOL. The high and low sales prices for the Common Stock as reported
by the American Stock Exchange were as follows:
------------------
High Low
==================
Calendar 1997
Fourth Quarter ................................ 6 1/4 4 1/2
------------------
Calendar 1998
First Quarter ................................. 5 3/4 4 1/2
Second Quarter ................................ 5 1/2 3 1/2
Third Quarter ................................. 4 1/8 2 7/8
Fourth Quarter ................................ 3 3/8 1 7/8
------------------
Calendar 1999
First Quarter ................................. 4 5/8 2
Second Quarter ................................ 3 1/8 2 1/8
Third Quarter ................................. 2 3/4 2
------------------
Fourth Quarter
(through December 6) ........................ 2 1/8 1 1/2
==================
As of December 6, 1999, there were approximately 600 holders of the
Company's Common Stock. No cash dividends have been declared on the Common
Stock.
Designed by Curran & Connors, Inc. / www.curran-connors.com
<PAGE>
JOULE
1245 Route 1 South
Edison, New Jersey 08837
732-548-5444
Our Web Site www.jouleinc.com is continuing to provide information about Joule
to those with access to the internet.
EXHIBIT 21
SUBSIDIARIES OF
JOULE INC.
Subsidiary State of Incorporation
JOULE Maintenance Corporation New Jersey
JOULE Technical Staffing, Inc. New Jersey
JOULE Technical Services, Inc. New Jersey
20 Orchard St., Inc. New Jersey
JOULE Transportation, Inc. New Jersey
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report incorporated by reference to this Form 10-K, into the Company's
previously filed Registration Statement File No. 33-57996.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 28, 1999
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