<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
OR
_______ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-15539
RIGHT MANAGEMENT CONSULTANTS, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 988-1588
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (Par Value $0.01 per share)
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 22, 1996 was $125,957,460. The number of shares
outstanding of the registrant's Common Stock as of March 22, 1996 was 4,198,582.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I & II Portions of the Company's 1995 Annual Report to Shareholders for
the fiscal year ended December 31, 1995.
Part III The Company's definitive proxy statement with respect to its 1996
Annual Meeting of Shareholders to be held on May 9, 1996.
<PAGE>
PART I
Item 1: Business
General
Right Management Consultants, Inc. (the "Company"), is a Pennsylvania
corporation organized in November 1980, doing business under the name "Right
Associates(R)," a federally-registered service mark. The Company is one of the
world's largest career management consulting firms specializing in career
transition (outplacement). Services developed by the Company are currently
offered through 126 offices in North America and Western Europe, of which 89 are
owned and operated by the Company ("Company Offices") and 37 are operated by 9
independently owned businesses ("Affiliates").
The Company licenses its Affiliates to use its service mark and
licenses and trains them to use its proprietary materials and methods. The
Company receives fees directly from employers for services rendered by Company
Offices and royalties and fees from the Affiliates. Both Company Offices and
Affiliates render career management consulting services and human resource
consulting services on either an individual or a group basis. See "Business -
Individual Career Transition" and "Business - Group Career Transition."
Career transition consulting services assists employers with
restructuring issues and helps separated employees develop strategies to achieve
their career objectives, including re-employment, self-employment or retirement.
The Company's fees for such career transition services are paid exclusively by
the employer. The Company does not provide its services to employees who are not
sponsored by employers, since it is not a "retail" career counseling firm,
employment agency, or an executive search firm.
Individual Career Transition
The major portion of the Company's business (approximately 72% of
revenue generated by Company Offices in 1995) consists of providing services, on
a one-on-one basis, to the employer-client and the terminated or resigning
employee.
The Company's individual consulting program for the employer includes
advice on conducting the termination interview, terms of severance pay and other
termination benefits and identification of termination-related issues for which
the employer may wish to seek legal counsel. Services by the Company to
terminated employees include assistance in handling the initial difficulties of
termination, identifying continuing career goals and options and in planning an
alternative career; aiding in developing skills for the search for a new job,
such as resume writing, identifying and researching types of potential
employers, preparing and rehearsing for interviews; continuing counseling and
motivation throughout the job search campaign; assessing new employment offers
and methods of accepting such offers (including consideration of relocation
issues) and, where appropriate, consulting with the employee's spouse regarding
the stresses of the employment search and the positive role the spouse may play
in all aspects of the new job search, as well as assisting with financial
planning and health maintenance.
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Group Career Transition
The remaining significant portion of the Company's career transition
consulting business consists of providing career transition consulting in group
contexts for companies making group reductions in their work force due to
reorganization, restructuring or other reasons. The Company's group programs
have, as their core, seminars for generally up to 12 employees per group, in
sessions extending over one to five days. Often, the group seminar is preceded
or followed by individual consulting. These group programs are designed for each
employer-client and are generally competitively priced and bid, based on the
number of consulting hours, number of employees involved and type of programs to
be provided. The group program may also be used for "voluntary separation" due
to reorganizations or other reasons.
The Company is also providing a combination of individual and group
career transition consulting services through a cost reimbursement plus fixed
fee contract between the Company and Resource Consultants Inc. ("RCI") for the
United States Army. Through this contract, counseling services are provided to
United States Army soldiers, civilians and their families who are leaving active
duty as a result of planned force reductions. These services are provided
through 34 Job Assistance Centers in the United States and abroad, which are
staffed by employees of a government division of the Company created for this
contract, and RCI, a Vienna, Virginia based consulting firm.
The contract contains annual renewal options for RCI and the United
States Army to extend through May 1997. All renewal options have been exercised
and the Company's anticipated share of the cost plus fixed fee contract revenue
will approximate $4,000,000 over the eighteen month period through May 1997.
Human Resource Consulting
The Company intends to continue to expand its career transition
consulting business and believes such business will remain its primary activity
and source of revenue in the foreseeable future. Nevertheless, the Company also
designs services to meet other human resource consulting needs of the market the
Company currently serves. These services assist employers and their employees in
identifying and improving areas of job performance, refining communication
skills and improving employee productivity. The Company also consults with
corporations on restructuring and realignment issues, providing customized
services to help manage all aspects of organizational change, including
planning, selection, retention strategy and communication issues. Other services
are designed to enhance the abilities of executives and managers to evaluate
employees' performance in making employment and promotion decisions. The Company
is devoting resources to the development of these services; however, the revenue
it currently generates through these services comprises only a small portion of
total Company revenue.
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Fees for Services Provided by Company Offices
For individual consulting services provided by Company Offices, the
Company normally receives a negotiated fee, depending upon the services
provided, which generally ranges between 10% and 20% of the terminated
employee's annual compensation. Fees for group programs are individually billed
depending upon the type of services the employer requests, the amount of
consulting time required and the number of employees involved.
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Organization and Distribution of Company Offices and Affiliates
The current network of Company Offices and Affiliates is outlined in
the Company's 1995 Annual Report to Shareholders under the caption "The World
of Right Associates".
Location of offices opened in the past five years:
Company Offices Company Offices
(continued)
1991 Brussels, Belgium (5)
Buffalo, New York Charlotte, N. Carolina (6)
Leeds, England Greensboro, N. Carolina (6)
Memphis, Tennessee Greenville, S. Carolina (6)
Mississauga, Ontario Jackson, Mississippi
Oakbrook Terrace, Illinois Lancaster, Pennsylvania
Wilmington, Delaware Madison, Wisconsin
Raleigh, N. Carolina (6)
1992 Vancouver, British Columbia (7)
Boston, Massachusetts (2)
Manchester, England 1995
Milwaukee, Wisconsin Charleston, South Carolina
Pasadena, California Cupertino, California (17)
San Bernardino, California Kingston, Ontario
Springfield, Massachusetts Providence, Rhode Island (17)
Woodland Hills, California Tulsa, Oklahoma
Oklahoma City, Oklahoma (16)
1993 San Antonio, Texas
Aberdeen, Scotland
Atlanta, Georgia (3) Affiliate offices (1)
Burlington, Massachusetts
Coventry, England 1990
Hunt Valley, Maryland Jacksonville, Florida (8)
Madison, Wisconsin Knoxville, Tennessee
New Orleans, Louisiana Overland Park, Kansas (9)
Regina, Saskatchewan
Saskatoon, Saskatchewan 1991
Tarrytown, New York Boca Raton, Florida (8)
Torrance, California Palm Beach, Florida (8)
Winnipeg, Manitoba San Juan, Puerto Rico (8)
Zurich, Switzerland
1992
Virginia Beach, Virginia (10)
1994
Allentown, Pennsylvania 1993
Antwerp, Belgium (4) Omaha, Nebraska (11)
Johnson City, Tennessee (12)
Affiliate Offices
(continued)
1994
Fort Mitchell, Kentucky (13)
Lexington, Kentucky (13)
Des Moines, Iowa (16)
1995
Kalamazoo, Michigan (14)
Kingsport, Tennessee (15)
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(1) See "Business - Affiliate Arrangements" for a description of Exclusive
Territories and related limitations on activities of Company Offices
and Affiliates.
(2) Initially opened as an Affiliate in 1984. Acquired as a Company Office
in 1992.
(3) Initially opened as an Affiliate in 1986. Acquired as a Company Office
in 1993.
(4) Initially opened by the Brussels Affiliate in 1993. Acquired as a
Company Office in 1994
(5) Acquired as a Company Office in 1994.
(6) Initially opened and controlled by the Charlotte Affiliate in the
following order: Charlotte (1986), Raleigh (1987), Greensboro (1989)
and Greenville (1992). Acquired as a Company Office in 1994.
(7) Initially opened as an Affiliate in 1990. Acquired as a Company Office
in 1994.
(8) Controlled by the Fort Lauderdale Affiliate.
(9) Initially opened and controlled by the St. Louis Affiliate. Acquired by
a new and separate Affiliate (Kansas City) in 1990.
(10) Controlled by the Richmond Affiliate.
(11) Controlled by the Kansas City Affiliate.
(12) Controlled by the Knoxville Affiliate.
(13) Controlled by the Cincinnati Affiliate.
(14) Controlled by the Detroit Affiliate.
(15) Controlled by the Knoxville Affiliate.
(16) Controlled by the Kansas City Affiliate.
(17) Acquired as Company Offices in 1995.
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Management of Company Offices and Affiliates
The Company believes that a decentralized approach of organizing its
business into regional offices, in some cases with satellite offices reporting
to them, allows the Company to be responsive to individual clients, as well as
allowing it to better serve its local and regional markets. Each Company Office
and Affiliate is responsible for marketing and sales, and consulting activities
in its assigned region. Through the Company's Affiliate network arrangement, the
Company's clients have access to the entire Company network of Company Offices
and Affiliates. See "Business - Affiliate Arrangements."
A "Regional Managing Principal" oversees each Company and Affiliate
regional office and has the authority to develop and implement the regional
marketing plan for the Company Offices or Affiliate offices in the region. The
Company operates under an operating hub system to oversee its network of Company
and Affiliate offices. Under this structure, the Regional Managing Principal
reports to a Group Executive Vice President ("Group EVP") responsible for that
operating unit. Each Regional Managing Principal of a Company Office currently
receives, among other compensation, an annual salary and a bonus based on the
operating income achieved in his or her respective region.
Affiliate Arrangements
The Basic Affiliate Relationship
The Company has previously entered into agreements ("Affiliate
Agreements") with Affiliates, which are independent franchisee businesses, to
provide the Company's career management consulting services within the
geographic area defined in each Affiliate Agreement (the "Exclusive Territory").
Affiliates render such services exclusively under the Company's registered
service mark, "Right Associates(R)". Under the Affiliate Agreements, the Company
assists the Affiliates in various ways in the provision of career management
consulting services. See "Business - Affiliate Arrangements - Company Training
of Affiliates" and "Affiliates' Payment of Fees and Royalties to Company."
Under the Affiliate Agreements, the Company is precluded from
establishing or maintaining Company Offices or otherwise soliciting customers,
conducting its consulting business or licensing other Affiliates to operate in
the Exclusive Territory of a particular Affiliate. In turn, the Affiliate is
prohibited from establishing or maintaining its own offices or "satellites,"
soliciting customers or engaging in career management consulting within
Exclusive Territories which the Company currently or in the future grants to
other Affiliates or assigns to Company Offices. A Company Office or an Affiliate
may, however, on a non-exclusive basis, perform sales and consulting activities
in any territory that has not been made the Exclusive Territory of another
Company Office or of an Affiliate.
There is not a formal Affiliate organization; however, a Management
Advisory Committee (the "Advisory Committee") exists which considers matters of
general concern to the Affiliates. The Advisory Committee is comprised of four
members appointed by the Company's management and three members elected by the
Affiliates for a three year term.
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Company Training of Affiliates
The Affiliate Agreement requires the Company to train the Affiliate and
its employees in the selling and the delivery of career management consulting
services. The Company is responsible for overall guidance and has established
Company standards and policies relating to its consulting services. The Company
provides proprietary sales and consulting materials, administrative forms
(including, among other things, guidelines for consulting client-employers and
terminated employees), materials used in conjunction with marketing the
consulting services and administration of its office and materials relating to
the Company's system of monitoring the progress of terminated employees. The
Company provides guidance, if requested by the Affiliates, with respect to the
hiring of the Affiliate's employees, the use and development of sales programs
and general issues of office operation and sales. The cost of such optional
assistance by the Company is paid for by the Affiliate, unless the Company
otherwise agrees not to charge for these services. The Company also provides
marketing support, public relations advertising and promotional support,
consisting of national and international media efforts directed by an in-house
marketing staff.
Affiliates' Payment of Fees and Royalties to Company
In consideration of the Company providing services, training and
licensing the use of its federally-registered service mark, the Affiliate
generally pays to the Company the following fees (which are not in the order of
their contribution to Company revenue): (1) a one-time non-refundable initial
Affiliate (franchise) fee; (2) a 10% royalty on the Affiliate's total gross
receipts; (3) a fee for services rendered in assisting the Affiliate in selling
the Company's programs to the employer-client; and (4) a fee for services
rendered in providing consulting services to terminated employees on certain
contracts and accounts sold and managed by Affiliates.
Term, Supervision and Termination of Affiliate Agreements
The Company's Affiliate Agreements provide for an initial term of three
or five years and are automatically renewed from year to year unless either
party gives the other notice of non-renewal (which may be without cause) at
least 120 days prior to the expiration of the then current term (unless a longer
notice period is required by local franchise laws).
During the term of the Affiliate Agreement, the Company may terminate
the arrangement, subject to local franchise laws and cure periods specified in
the Affiliate Agreements, for a variety of reasons, including a material breach
of such Agreement by the Affiliate, the failure by the Affiliate to achieve at
least 75% of the minimum volume of business set forth in its Affiliate Agreement
in any year of the Affiliate's operation or the Affiliate's failure to otherwise
conduct normal business operations diligently and regularly or to use its best
efforts to sell and provide career transition consulting services, or the
Affiliate's failure to adhere to the written service standards established by
the Company in consultation with the Advisory Committee. Company may also
terminate an Affiliate Agreement due to the death, disability or retirement of
key Affiliate personnel or of principal stockholders of an Affiliate.
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The Company has offered and implemented with substantially all of its
existing North American Affiliates an addendum to their respective Affiliate
Agreements. Under the terms of the addendum, the Company relinquishes its right
to give notice of non-renewal of the Affiliate's Affiliate Agreement upon the
expiration of its initial or one of its renewal terms. However, the Advisory
Committee is empowered to terminate, upon specified grounds, the Affiliate
Agreement of Affiliates who sign the addendum. In addition, the addendum permits
the Company to terminate the Affiliate Agreement of any Affiliate if certain
trends in the volume of business generated by the Affiliate deviate by more than
specified amounts below the comparably defined trends for all North American
offices of the Company and its Affiliates measured as a group.
An Affiliate may terminate the Affiliate Agreement at any time (after a
specified cure period) upon a material breach of the Affiliate Agreement by the
Company.
The Company has agreed with substantially all of its existing North
American Affiliates that in the event the Company offers to any other North
American Affiliate any provision in the Affiliate Agreement with such other
North American Affiliate which is more beneficial to such other North American
Affiliate than the terms of the existing Affiliate Agreements with the rest of
the current North American Affiliates, then the new provision will be offered to
all existing North American Affiliates, except for provisions added or deleted
to (a) comply with a particular state or provincial law or regulation; (b)
maintain in force prior agreements with specific Affiliates; or (c) address the
unique nature or character of other businesses or activities engaged in by a
specific Affiliate.
Affiliates' Right of First Refusal
Pursuant to the Affiliate Agreements, the Affiliates may have a right
of first refusal to purchase shares of the Company's Common Stock in case of
certain proposed sales or exchanges of the Company's Common Stock. Under the
terms of the Affiliate Agreements, in the event that 51% or more of the Common
Stock of the Company is proposed to be sold by one or more stockholders of the
Company in a single transaction (exclusive of a corporate merger or
consolidation in which the Company is not the surviving party and transactions
in which the common stock of another company is exchanged for the Common Stock
of the Company), the Affiliates may have a right of first refusal to acquire the
Common Stock of the Company being sold under the same terms as the proposed
transaction.
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Acquisitions
During 1995, the Company completed three separate acquisitions of
outplacement consulting firms. Two of the transactions resulted in the Company
acquiring the assets of former Affiliates of the Company, located in Cupertino,
California and Providence, Rhode Island. The third transaction resulted in the
Company acquiring the outstanding stock of LM&P, SA located in Paris, France.
The total purchase price for these acquisitions aggregated approximately
$8,150,000, including costs of acquisition. The acquisitions were consummated
through combinations of cash, assumption of incomplete outplacement contracts
and obligations to pay certain defined incentives based upon the results of the
acquired entities subsequent to the transactions.
During the period 1991 through 1994, the Company completed eight
separate acquisitions of outplacement consulting firms for combinations of cash,
future defined incentives, incomplete outplacement contracts and other
considerations. The total purchase price for these transactions aggregated
approximately $12,542,000 including costs of acquisition.
Competition
The Company competes against other providers of career transition
consulting services and other human resource consulting services. The Company
believes that, based on revenue, it, together with its Affiliates, is the second
largest provider of career management services in the world, behind Drake Beam
Morin, Inc., a subsidiary of Harcourt General, Inc. The Company believes that
the principal methods of competition in its industry are quality of service,
professional staff and price. On a regional basis, the Company competes against
several outplacement and other human resource consulting firms that concentrate
and are well-established in a particular region. The Company believes that the
cost for its services is competitive, based on the quality and value of services
offered. The Company may also face competition from future expansion by other
entities into the career transition consulting services and other human resource
consulting businesses.
Government Regulation
The offering of Affiliate Agreements to prospective Affiliates by the
Company and certain aspects of the on-going relationship between the Company and
the Affiliates are subject to the franchise regulations of the Federal Trade
Commission (the "FTC") and to various franchise laws enacted by certain of the
states in which the Company's Affiliates are located. FTC regulations require
the Company to make certain specified disclosures to a prospective Affiliate
prior to the consummation of any Affiliate arrangements. These disclosures
generally relate to the Company, the business which is subject to the Affiliate
Agreement and the terms of the Affiliate Agreement. The provisions and scope of
the state laws vary. In some states, the Company is required to register the
offering of the Affiliate Agreements with regulatory agencies and to license
Company personnel who are directly involved in offering the Affiliate Agreement
to prospective Affiliates. Some states also regulate certain terms of the
Affiliate Agreement, primarily the terms upon which the Company can terminate an
Affiliate Agreement for cause or can decline to renew an Affiliate Agreement
after it expires. Other states' laws impose on the Company general duties of
fair dealing with the Affiliates and prohibit unfair discrimination among or
against Affiliates. As a result of such laws regulating relationships with the
Affiliates in certain states, the Company has less flexibility than it would
otherwise have in structuring such relationships.
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Information Relating to Foreign Operations
See the Company's Consolidated Financial Statements, Note J,
"Geographic Segments", contained in the Company's Annual Report to Shareholders,
for information regarding the Company's foreign operations. This information is
responsive to Item 101(d) of Regulation S-K and is incorporated by reference
herein.
Employees
At February 29, 1996, the Company and its subsidiaries employed 759
persons full-time, including 15 in senior management, 85 in other managerial and
professional roles, 369 in field operations as consultants, and 290 in clerical
capacities. In addition, the Company employed 264 persons on a part-time basis
as professional consultants. Consultants are generally required to have prior
executive or management experience and are provided Company training. None of
the Company's employees are subject to collective bargaining agreements. The
Company believes that its employee relations are good.
Item 2: Properties
The Company leases approximately 22,618 square feet for its corporate
headquarters in the 1818 Market Street Building in Philadelphia, Pennsylvania.
The initial term of the lease expires December 15, 2005 and is at an annual base
rent of approximately $509,000, subject to annual operating expense escalation
clauses. The Company has the option to extend the lease for an additional term
of five years on the same terms and conditions, except that the rent will be
changed to the then current market rate for the building.
All office space for Company Offices is leased. The leases typically
have three to five year terms and some have renewal options. The Company leases
approximately 526,000 square feet for all Company Offices, including the
corporate headquarters, at an aggregate base yearly rental of approximately
$11,301,000. Most of these leases are also subject to annual operating expense
escalation clauses. The Company believes its facilities are adequate.
Item 3: Legal Proceedings
The Company is not a party to, nor is its property the subject of, any
material pending legal proceedings.
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable.
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Item 4a: Executive Officers of the Registrant
Each of the following executive officers of the Company has been
appointed by the Board of Directors and serves at the discretion of the Board.
All of the executive officers are expected to devote their full business time to
the Company's affairs.
<TABLE>
<CAPTION>
Name Age Positions
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<S> <C> <C>
Richard J. Pinola 50 Chairman of the Board of Directors and
Chief Executive Officer
Frank P. Louchheim 72 Founding Chairman and Director
Joseph T. Smith 60 President, Chief Operating Officer and Director
G. Lee Bohs 36 Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
Joseph E. Jannotta, Jr. 68 Executive Vice President, Career Management
Consulting and Director
Manville D. Smith 57 Executive Vice President of Business Development
Larry A. Evans 53 Executive Vice President and Director
Nancy N. Geffner 56 Group EVP - Greater New York Region and Director
Victor V. Coppola 53 Group EVP - Mid-Atlantic U.S. Region
Peter J. Doris 49 Group EVP - Southeast U.S. Region
David S. Orr 61 Group EVP - North Central U.S. Region
Warren R. Radtke 60 Executive Vice President - Northeast U.S. Region
Gary L. Saenger 51 Executive Vice President - Southwest U.S. Region
Terry W. Szwec 45 Executive Vice President - Canadian Region
George L. Whitwell 55 Executive Vice President - Northwest and
South Central U.S. Regions
</TABLE>
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Mr. Pinola was elected as a Director by the Board in October 1989. Mr.
Pinola is a Certified Public Accountant and joined Penn Mutual Life Insurance
Company in 1969 and was appointed Senior Vice President, Insurance Business in
1984. He was promoted to Executive Vice President of Insurance, Pensions and
Marketing in 1987 and was appointed President and Chief Operating Officer in
1988, which positions he held until his resignation in September 1991. Mr.
Pinola was a financial consultant to various organizations from September 1991
until July 1992, at which time he was appointed President and Chief Executive
Officer of the Company. Effective January 1, 1994, Mr. Pinola was appointed
Chairman of the Board of Directors and continues as Chief Executive Officer. Mr.
Pinola also serves as a director on the Board of K-Tron International, a
publicly held company.
Mr. Louchheim was one of the founders of the Company and from November
1980 until September 1987, Mr. Louchheim served as President, Chief Executive
Officer and Chairman of the Board of Directors of the Company. From January 1992
to December 31, 1993, he served as the full-time Chairman of the Board of
Directors. Effective January 1, 1994, Mr. Louchheim was appointed Founding
Chairman and continues as a Director.
From 1963 to 1980, Mr. Joseph Smith was employed at the Penn Mutual
Life Insurance Company, where he worked in increasingly responsible positions.
He was appointed Second Vice President of Administrative Services in 1973, and
in 1976 was promoted to Vice President of Administration and Human Resources.
From 1981 to 1984, Mr. Smith worked as an independent consultant offering a
range of consulting services to businesses. He joined the Company as a Senior
Consultant in Professional Services in August 1984 and, from August 1988 until
September 1992, held the position of Regional Managing Principal of the
Company's Philadelphia Office. Mr. Smith was elected as a Director in May 1991.
From September 1992 through December 1993, Mr. Smith served as the Company's
Chief Operating Officer. Effective January 1, 1994, Mr. Smith was appointed
President and continues as Chief Operating Officer.
From June 1981 to January 1987, Mr. Bohs was employed at the regional
Certified Public Accounting firm of Asher & Company, Ltd., initially as a staff
accountant, and then as an accounting and auditing manager. He joined the
Company as Manager of Financial Reporting in January 1987, and was elected
Treasurer in December 1987 and Vice President, Finance, effective January 1989.
From March 1991 until December 1995, Mr. Bohs served as Senior Vice President
and Chief Financial Officer. He was appointed Secretary by the Board of
Directors in May 1995. Effective January 1996, he was promoted to Executive Vice
President and continues to serve as Chief Financial Officer.
Mr. Joseph E. Jannotta was appointed Director by the Board in October
1994. For 25 years Mr. Jannotta worked for Jewel Companies, Inc., a multibillion
retailing conglomerate. He had roles in sales and management development, and he
spent his last five years as Vice President of Human Resources of Osco Drug, the
second largest U.S. drug store chain. From 1975 to 1978, Mr. Jannotta was an
owner and operator of a Company that introduced Yoplait Yogurt to the U.S.,
until it was sold to General Mills in 1978. In 1978, Mr. Jannotta founded
Jannotta, Bray & Associates, Inc. a $17 million career management consulting
firm where he served as Chairman until the Company acquired it in September
1994.
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Mr. Manville Smith worked for the 3M Company where he had a twenty year
career in a variety of positions, including Managing Director for several
international subsidiaries and operations. Subsequently, Mr. Smith went to work
for the Parker Pen Company where he served as Vice President of Strategic
Planning from July 1980 to April 1981. In April 1981, Mr. Smith was promoted to
President of the Parker Pen Company with worldwide responsibility for this
manufacturer of quality writing instruments, where he served until July 1984.
From July 1984 until July 1988, Mr. Smith provided strategic planning consulting
to various organizations. In 1988, Mr. Smith joined the operations of the
Company's Florida Affiliate as Executive Director, where he provided consulting
services. In July 1994, Mr. Smith joined the Company as Executive Vice
President, Business Development, responsible for strategic business development
on a worldwide basis.
Prior to May 1978, Mr. Evans was professionally involved in the
international finance and venture capital industries. From May 1978 to November
1980, Mr. Evans was employed as an independent outplacement consultant for
Bernard Haldane Associates, Inc., reporting to Mr. Louchheim. Since November
1980, Mr. Evans has served as Executive Vice President and a Director of the
Company. In January 1988, Mr. Evans was named Regional Sales Manager of the New
York City Office and, in January 1990, Mr. Evans was named Regional Managing
Principal of the Company's Stamford, Connecticut Office. From September 1992
until April 1995, Mr. Evans held the position of Regional Managing Principal of
the Company's Philadelphia Office. In May 1995 Mr. Evans joined the Company's
Corporate office where he works together with the Company's regional offices in
marketing to major national and international accounts.
From August 1979 to February 1981, Ms. Geffner was a Career Consultant
with Bernard Haldane Associates, Inc. Since March 1981, Ms. Geffner has served
as Regional Managing Principal of the Company's New York City Office. In June
1983, Ms. Geffner was elected to the Board of Directors and in December 1983 was
named an Executive Vice President of the Company. In 1993, Ms. Geffner took on
the additional responsibilities of directing the Company's Key Executive Service
program, the consulting program for senior executives, throughout the United
States and Canada. Effective January 1996, Ms. Geffner resigned from this role
and was appointed Group EVP for the Greater New York Region.
From 1967 to 1995, Mr. Coppola was employed by Coopers & Lybrand LLP,
where he served in various capacities including Human Resources Partner at the
New York office, Managing Partner at the firm's Baltimore office, National
Director of Middle Market Business Services and finally, Partner in the Middle
Market Group in the Philadelphia office. Mr. Coppola is a co-author of the book
Coopers & Lybrand Guide to Growing Your Business and the recipient of the Blair
Thompson Award for his support of entrepreneurism in the Philadelphia
metropolitan area. In May 1995, Mr. Coppola joined the Company as the Regional
Managing Principal of the Company's Philadelphia region. In addition to this
role, effective January 1, 1996, Mr. Coppola was appointed Group EVP for the
Mid-Atlantic U.S. Region.
Prior to joining Right Associates, Mr. Doris was Senior Vice President
of Human Resources for a large New York City based bank. From 1986 to 1990, Mr.
Doris was Senior Vice President, Sales and Operations of the Company. Effective
January 1991, he became a Group EVP in which capacity he is currently
responsible for the Southeast U.S. Region.
13
<PAGE>
Prior to 1990, Mr. Orr had a thirty one year career in the
telecommunications industry in which he was a senior officer for Indiana Bell,
Vice President - Regional Business Services for AT&T, Vice President - Marketing
Planning with Ameritech Services and, finally, President of Ameritech
Communications. In 1990, Mr. Orr joined Jannotta, Bray & Associates as an
Executive Program Consultant, a position he held until it was acquired by the
Company in September 1994. Subsequent to the acquisition, Mr. Orr served as
Regional Managing Principal for the Chicago Region of Right/Jannotta Bray until
February 1995 when he was promoted to Group EVP in which capacity he is
currently responsible for the North Central U.S. Region.
From 1965 to 1980, Mr. Radtke was the owner of an independent human
resource consulting firm specializing in executive outplacement, performance
appraisal systems, career management, organizational development and management
assessments. He joined the Right Associates(R) network in 1980 as the Regional
Managing Principal of the Boston, Massachusetts Affiliate office. Mr. Radtke
joined the Company in December 1992 and through December 31, 1993 served as the
Regional Managing Principal of the Company's Boston region. Effective January 1,
1994, Mr. Radtke became Group EVP for the Northeast U.S. Region and continues to
serve as Regional Managing Principal of the Company's Boston region.
Mr. Saenger spent over ten years with American Hospital Supply
Corporation, where he served in various human resources functions at the senior
management level. From 1982 to 1985, Mr. Saenger was with Transaction Technology
Incorporated, a subsidiary to CitiCorp, where he managed the human resources
function. From 1985 to 1991, Mr. Saenger was Senior Vice President of Security
Pacific Automation Company, Inc., a subsidiary of Security Pacific Corporation,
where had full responsibility for human resource policy and implementation. In
1991, Mr. Saenger joined the Company as the Regional Managing Principal of the
Company's Los Angeles region. Effective February 1995, Mr. Saenger became Group
EVP for the Southwest U.S. Region. Mr. Saenger has an M.A. in Personnel from
Idaho State University.
Mr. Szwec was employed as Product Manager for Bristol Myers Canada,
Ltd. from 1969 until 1970, when he left to become Manager of Training and
Development for de Havillard Aircraft, Ltd. In 1976, Mr. Szwec became Director
of Human Resources for Control Data Canada, Ltd., where he stayed until 1986
when he began his own consulting practice specializing in executive training and
development, human resources effectiveness and career planning. Mr. Szwec joined
the Right Associates(R) network in 1987 as then Regional Managing Principal of
the Toronto Affiliate office. Mr. Szwec joined the Company in November 1990 as
Regional Managing Principal of the Company's Toronto region. Effective January
1, 1994, Mr. Szwec became Group EVP for the Canadian Region and continues to
serve as the Regional Managing Principal of the Company's Toronto region.
From July 1968 to February 1983, Mr. Whitwell held various management
positions, including Director of Outplacement for Fox-Morris Associates, Inc., a
Philadelphia, Pennsylvania-based personnel consulting firm. From February 1983
to June 1986, Mr. Whitwell served as Senior Vice President, Field Operations, of
the Company. Mr. Whitwell was a Director of the Company from March 1985 to May
1991 and from June 1986 to September 1987 was Executive Vice President, Field
Operations of the Company. For the period October 1987 through December 1990,
Mr. Whitwell served as the Regional Managing Principal of the Company's
Parsippany, New Jersey office. Effective January 1991, he became a Group EVP in
14
<PAGE>
which capacity he is currently responsible for the Northwest and South Central
U.S. Regions. Mr. Whitwell also serves as the Regional Managing Principal of the
Company's San Francisco region.
Each executive officer has been elected for a term expiring with the
first Board of Directors' meeting held after the next annual meeting of
shareholders.
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
Incorporated by reference is the information appearing under the
caption "Common Stock Data" in the Company's 1995 Annual Report to Shareholders,
the incorporated portions of which are included as Exhibit 13 to this Report.
Item 6: Selected Financial Data
Incorporated by reference is the information appearing under the
caption "Selected Financial Data" in the Company's 1995 Annual Report to
Shareholders, the incorporated portions of which are included as Exhibit 13 to
this report.
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated by reference is the information appearing under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the Company's 1995 Annual Report to Shareholders, the
incorporated portions of which are included as Exhibit 13 to this Report.
Item 8: Financial Statements and Supplementary Data
Incorporated by reference is the information appearing under the
caption "Consolidated Balance Sheets", "Consolidated Statements of Income",
Consolidated Statements of Stockholders' Equity", Consolidated Statements of
Cash Flows" and "Notes to Consolidated Financial Statements" in the Company's
1995 Annual Report to Shareholders, the incorporated portions of which are
included as Exhibit 13 to this Report.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
15
<PAGE>
PART III
The information called for by Items 10 through 13 of Form 10-K
(except for the information set forth on pages 11-14 with respect to Executive
Officers of the Registrant) is hereby incorporated by reference to the
information set forth under the captions "Election of Directors", "Executive
Compensation", "Voting Securities, Voting Rights and Security Ownership" and
"Ratification of Appointment of Independent Certified Public Accountants"
contained in the Company's definitive Proxy Statement with respect to its 1996
Annual Meeting of Shareholders, to be filed with the Securities and Exchange
Commission within 120 days following the end of the Company's fiscal year.
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial statements
The following is a list of financial statements which have
been incorporated by reference from the Company's 1995 Annual Report to
Shareholders, as set forth in Item 8:
Report of Independent Public Accountants Consolidated
Balance Sheets as of December 31, 1995 and 1994 Consolidated
Statements of Income for each of the three years in the
period ended December 31, 1995
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended
December 31, 1995
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1995
Notes to Consolidated Financial Statements
2. Financial statement schedule
Report of Independent Public Accountants
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not required,
or because the required information is contained in the Company's consolidated
financial statements or the notes thereto.
3. Exhibits required to be filed by Item 601 of
Regulation S-K:
16
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
3.1. Company's Articles of Incorporation, together with all amendments
thereto, (incorporated by reference to the Company's Form S-1 (File
No. 33-9034), filed November 12, 1986).
3.2. Company's By-Laws (incorporated by reference to the Company's report
on Form 10-K for the fiscal year ended December 31, 1988, filed March
30, 1989).
10.01 Agreement among Right Management Consultants, Inc. and Right Human
Resources Consultants, Inc., dated December 26, 1984 (incorporated by
reference to the Company's Form S-1 (File No. 33-9034), filed
September 25, 1986).
10.02 Agreement among Right Management Consultants, Inc. and Midwest
Reemployment Consultants, Inc. dated February 15, 1985 (incorporated
by reference the Company's Form S-1 (File No. 33-9034), filed
September 25, 1986).
10.03 Agreement among Right Management Consultants, Inc. and Human
Resources, Inc., dated December 26, 1984 (incorporated by reference
to the Company's Form S-1 (File No. 33-9034), filed September 25,
1986).
10.04 Form of Incentive Stock Option Plan, adopted by the Company's
shareholders on November 24, 1986, to be effective as of September 8,
1986 (incorporated by reference to the Company's Form S-1 (File No.
33-9034), filed November 12, 1986).
10.05 Non-Qualified Stock Option Plan, adopted, as of April 30, 1984
(incorporated by reference to the Company's Form S-1 (File No.
33-9034), filed September 25, 1986).
10.06 1986 Shareholders' Agreement (incorporated by reference to the
Company's Form S-1 (File No. 33-9034), filed November 12, 1986).
10.07 401(k) Savings Plan (incorporated by reference to the Company's Form
S-1 (File No. 33-9034), filed September 25, 1986). *
10.08 Amendment to Employment Agreement between Right Management
Consultants, Inc. and Frank P. Louchheim, dated January 1, 1992
(incorporated by reference to the Company's report on Form 10-K for
the fiscal year ended December 31, 1991, filed March 30, 1992). *
10.09 Supplemental Deferred Compensation Plan for Richard J. Pinola, dated
July 1, 1992 (incorporated by reference to the Company's report on
Form 10-K for the fiscal year ended December 31, 1991, filed March
30, 1992). *
10.10 Further Amendment to Amended and Restated Employment Agreement
between Right Management Consultants, Inc. and Frank P. Louchheim
dated February 16, 1993. *
10.11 1993 Stock Option Plan (incorporated by reference as Exhibit 4 filed
in the Company's report on Form S-8 (File No. 33-58698), filed
February 23, 1993). *
10.12 Purchase Agreement dated September 1, 1994 by and between Registrant
and Jannotta, Bray and Associates, Inc. (Schedules omitted)
(incorporated by reference to the Company's Form 8-K, dated September
1, 1994).
10.13 Employment Agreement dated September 1, 1994 by and between
Registrant and Joseph E. Jannotta, Jr. (incorporated by reference to
the Company's Form 8-K, dated September 1, 1994). *
* These documents are compensatory plans or agreements required to be filed as
Exhibits.
17
<PAGE>
10.14 Employment Agreement dated September 1, 1994 by and between
Registrant and Harold B. Bray, Jr. (incorporated by reference to the
Company's Form 8-K, dated September 1, 1994). *
10.15 Employment Agreement dated September 1, 1994 by and between
Registrant and David Maguire (incorporated by reference to the
Company's Form 8-K, dated September 1, 1994).*
10.16 Restrictive Covenant dated September 1,1994 by and between Registrant
and Joseph E. Jannotta, Jr. (incorporated by reference to the
Company's Form 8-K, dated September 1, 1994). *
10.17 Restrictive Covenant dated September 1,1994 by and between Registrant
and Harold B. Bray, Jr. (incorporated by reference to the Company's
Form 8-K, dated September 1, 1994). *
10.18 Amended and Restated Revolving Credit and Term Loan Agreement between
Right Management Consultants, Inc., et al and PNC Bank, National
Association, dated June 30, 1994, with modifications dated August 26,
1994 and November 16, 1994.
10.19 $5,000,000 Term Note between Right Management Consultants, Inc. and
its wholly-owned subsidiaries and PNC Bank, National Association,
dated August 26, 1994.
10.20 Lease Agreement between Metropolitan Life Insurance Company and Right
Management Consultants, Inc., dated October 18, 1983 and amended on
August 12, 1986; November 6, 1987; and July 15, 1991.
10.21 Purchase Agreement dated February 15, 1995 by and between Registrant
and Worth Associates, Inc. and Robert A. Fish (incorporated by
reference to the Company's report on Form 10-Q for the quarter ended
March 15, 1595, filed May 15, 1995).
10.22 1993 Stock Incentive Plan, as amended (incorporated by reference to
the Company's Proxy Statement for Annual Meeting of Shareholders held
on May 4, 1995).*
10.23 Director's Stock Option Plan of the Company (incorporated by
reference to the Company's Proxy Statement for Annual Meeting of
Shareholders held on May 4, 1995).*
10.24 Fifth Modification Agreement to the June 30, 1994 Amended and
Restated Revolving Credit and Term Loan Agreement between Right
Management Consultants, Inc., et al and PNC Bank, National
Association, dated August 31, 1995 (incorporated by reference to the
Company's report on Form 10-Q for the quarter ended September 30,
1995, filed November 14, 1995).
10.25 Employment Agreement dated December 12, 1995 by and between Right
Management Consultants, Inc. and Richard J. Pinola. *
10.26 Employment Agreement and Supplemental Deferred Compensation Plan
dated December 12, 1995 by and between Right Management Consultants,
Inc. and Joseph T. Smith. *
11. Consolidated Earnings per Share Calculations. *
13. Portions of the Company's 1995 Annual Report to Shareholders
expressly incorporated by reference.
* These documents are compensatory plans or agreements required to be filed as
Exhibits.
18
<PAGE>
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP.
27. Financial Data Schedule+
(b) Report on Form 8-K.
The Company did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
+Filed in electronic form only.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /s/ Richard J. Pinola
---------------------------------
Richard J. Pinola,
Chairman of the Board and
Chief Executive Officer
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Richard J. Pinola Chairman of the Board
-------------------- and Chief Executive Officer March 29, 1996
Richard J. Pinola
/s/ G. Lee Bohs Chief Financial
- ------------------------ Officer and Principal
G. Lee Bohs Accounting Officer March 29, 1996
/s/ Frank P. Louchheim
- ------------------------ Director March 29, 1996
Frank P. Louchheim
/s/ Joseph T. Smith
- ------------------------ Director March 29, 1996
Joseph T. Smith
/s/ John R. Bourbeau
- ------------------------ Director March 29, 1996
John R. Bourbeau
/s/ Larry A. Evans
- ------------------------ Director March 29, 1996
Larry A. Evans
/s/ Nancy N. Geffner
- ------------------------ Director March 29, 1996
Nancy N. Geffner
/s/ Joseph E. Jannotta, Jr.
- ------------------------ Director March 29, 1996
Joseph E. Jannotta, Jr.
/s/ Raymond B. Langton
- ------------------------ Director March 29, 1996
Raymond B. Langton
/s/ Rebecca J. Maddox
- ------------------------ Director March 29, 1996
Rebecca J. Maddox
/s/ Catherine Y. Selleck
- ------------------------ Director March 29, 1996
Catherine Y. Selleck
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Right Management Consultants, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Right Management Consultants, Inc. and subsidiaries
included in this Form 10-K and have issued our report thereon dated January 31,
1996. Our audits were made for the purpose of forming an opinion on those
financial statements taken as a whole. The schedule listed in Item 14(a)(2) is
the responsibility of the Company's management. This schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the audit procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Philadelphia, Pennsylvania
January 31, 1996
<PAGE>
Right Management Consultants, Inc.
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additions
-------------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Descripition Year Expenses Accounts Deductions Year
- ------------ ---- -------- -------- ---------- ----
<S> <C> <C> <C> <C> <C>
1995:
- ----
Allowance for doubtful accounts $651,000 $400,000 -- $297,000 (1) $754,000
Deferred income tax asset valuation
reserve $391,000 -- -- $391,000 (3) --
1994:
- ----
Allowance for doubtful accounts $794,000 $ 75,000 -- $218,000 (1) $651,000
Deferred income tax asset valuation
reserve $583,000 -- -- $192,000 (3) $391,000
1993:
- ----
Allowance for doubtful accounts $318,000 $485,900 -- $9,900 (1) $794,000
Deferred income tax asset valuation
reserve -- $134,000 $449,000 (2) $583,000
</TABLE>
(1) Accounts deemed to be uncollectible.
(2) Cost incurred with the adoption of SFAS 109 as of January 1, 1993. See the
Company's Consolidated Financial Statements, Notes A and E for further
explanation.
(3) Reduction due to the the utilization, benefit and expiration of certain
foreign net operating losses.
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ---------- -------
10.25 Employment Agreement dated December 12, 1995
by and between Right Management Consultants, Inc.
and Richard J. Pinola.
10.26 Employment Agreement and Supplemental Deferred
Compensation Plan dated December 12, 1995 by and between Right
Management Consultants, Inc. and Joseph T. Smith.
11. Consolidated Earnings per Share Calculations.
13. The Company's 1995 Annual Report to
Shareholders, portions of which are incorporated by reference.
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP.
27. Financial Data Schedule+
+Filed in electronic form only.
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 12th day of December, 1995, by and
between RIGHT MANAGEMENT CONSULTANTS, INC., a Pennsylvania corporation
(hereinafter called "Company"), and RICHARD J. PINOLA, an individual
(hereinafter called "employee").
WITNESSETH:
Company desires to employ Employee, and employee desires to be employed
by Company, on the terms and conditions hereinafter stated.
NOW THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Company and
Employee agree as follows:
1. Employment. Company hereby employs Employee and employee
hereby accepts employment by Company for the period and upon the terms and
conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall serve Company as its Chairman of
the Board and Chief Executive Officer ("CEO"), and, subject to continued
election thereto by the Company's shareholders, as a member of Company's Board
of Directors (the "Board"). The powers, authority and duties of the offices of
Chairman and CEO of Company shall be those customary to such offices with
corporations comparable to Company.
(b) Throughout the term of this Agreement, Employee
shall devote his entire working time, energy, skill and best efforts to the
performance of his duties hereunder in a manner which will faithfully and
diligently further the business and interests of Company.
3. Term.
(a) The initial term of Employee's employment with
Company under this Agreement shall be as of January 1, 1996 and continuing up to
and through December 31, 1998.
(b) Unless either party gives written notice of its
intention to terminate Employee's employment under this Agreement at the end of
the initial or any renewal term by giving the other party such notice, at least
one hundred twenty (120) days prior to the expiration of the then current term,
employee's employment under this Agreement shall be deemed to have been renewed
for an additional term of one (1) year commencing on the day after the
expiration of the then current term. Notwithstanding the foregoing, employee's
employment with Company will not be renewed under this Agreement on or after
December 31 of the calendar year in which Employee reaches sixty-five (65) years
of age.
1
<PAGE>
(c) Notwithstanding the provisions of Sections 3(a)
and 3(b) hereof, in the event that: (i) a "controlling interest" in the capital
stock of Company is sold in a single transaction or a group of related
transactions to one or more buyers acting in concert; (ii) Company sells all or
substantially all of its assets; or (iii) Company is a party to any corporate
merger or consolidation in which one or more parties acting in concert who did
not previously hold a "controlling interest" in the capital stock of Company
acquires or acquire such a "controlling interest" in the capital stock of
Company or its successor entity (each such a event to constitute a "Change in
Control"), Employee may, upon written notice to Company within sixty (60) days
of such Change in Control, elect to: (A) continue his employment with Company
for the greater of the then current term or a period that expires two years from
the date of the Change in Control; or (B) voluntarily terminate his employment
with Company and receive severance compensation as if this were a "Compensated
Termination" pursuant to Section 6 hereof for a "Section 6 Period" that expires
upon the later of the date the then current term would have expired but for the
earlier termination described herein or two years from the date of the Change in
Control. In the event that Employee elects to remain employed by Company
pursuant to (A) above, the total amounts payable annually to employee for the
period described in (A) shall be not less than the greater of: (I) the total
amount of the Base Salary and Incentive Payments paid under Sections 4(a) and
4(b) during the 12-month period for the calendar year immediately preceding the
Change in Control; or (II) Four Hundred and Fifty Thousand ($450,000) Dollars.
For the purposes of this Section 3(c), a "controlling interest" in the capital
stock will constitute that number of shares which, as a practical matter,
permits the holder or holders to elect a majority of the members of the Board.
It is agreed that shares of capital stock possessing the right to cast a
majority or more of the votes entitled to be cast for the election of directors
of Company shall conclusively constitute a "controlling interest", but that a
block of shares possessing the right to cast less than a majority of the number
of votes entitled to be voted may, under the circumstances then pertaining,
constitute a "controlling interest".
4. Compensation and Benefits.
(a) Base Salary. For all of the service rendered by
Employee to Company, Employee shall receive a base salary (the "Base Salary")
payable at an annual rate equal to $450,000. Such Base Salary shall be payable
in reasonable periodic installments in accordance with Company's regular payroll
practices in effect from time to time. Employee's Base Salary is subject to
annual review and adjustment at the discretion of Company, but in no event shall
Company reduce the Base Salary to less than the amount specified above during
the periods referred to without the consent of employee.
2
<PAGE>
(b) Incentive Payments. In addition to the Base
Salary, throughout the term of Employee's employment with Company hereunder,
Company shall pay to Employee annually, a cash bonus as incentive compensation
based upon Company's financial performance for that year ("Incentive Payments")
in such amounts as are decided upon by the Board or its Compensation Committee.
Any and all bonuses shall be determined based upon target and comparison that
are consistent with those to be used by the Board in determining the amounts
payable under Company's Incentive Compensation Plan for Senior Corporate Staff.
In the event that the employment of Employee terminates otherwise than pursuant
to this Section 4(b) or Section 6 hereof, on a day other than the last day of a
fiscal year of Company, in addition to Base Salary and other payments accrued
through the effective date of the termination, Company shall pay to Employee the
"pro rata portion" (as hereafter defined) of the Incentive Payments which would
have been due to Employee if he had remained in the employ of Company for the
full fiscal year in which his employment terminated. For purposes of the
immediately preceding sentence, the "pro rata portion" shall be obtained by
dividing the number of days (including intervening weekend days and holidays) in
the fiscal year that Employee was employed by Company by the number 365.
(c) Fringe Benefits. Throughout the term of this
Agreement and as long as they are kept in force by Company, employee shall be
entitled to participate in and receive the benefits of any profit sharing or
retirement plans and any health, life, accident or disability insurance plans or
programs made available to other similarly situated employees of Company and
shall be entitled to participate in the Supplemental Deferred Compensation
Program attached as Exhibit "A" to the Employment Agreement dated July 1, 1992,
by and between Company and Employee, but the participation of employee, if any,
in Company's stock option, stock appreciation, "phantom" stock plans or similar
plans, will be wholly within the discretion of the Board, or a committee of the
Board which administers any plan. With respect to the term of Employee's
employment with Company under this Agreement, the Board has not made any
determination with regard to Employee's participation in any stock option, stock
appreciation, "phantom" stock plans or similar plans. However, the Company shall
consider each year whether or not Employee shall be awarded any stock options.
Company may, at its sole discretion add, delete or change any stock option,
stock appreciation, or phantom stock plans that Employee may participate in upon
notice to Employee. If this Agreement is not renewed by Company after the
expiration of the then current term, Company shall provide to Employee
outplacement consulting services then generally being made available by Company
to executive candidates.
(d) Vacation. Employee shall be entitled to vacation
in accordance with Company's general policies with respect thereto from time to
time.
(e) Automobile. During the term of Employee's
employment with Company under this Agreement, Company shall furnish Employee
with the use of a luxury automobile, insurance thereon, and the costs of fuel,
maintenance and necessary repairs as incurred. Employee shall be permitted
unrestricted use of such automobile without the obligation to account or
reimburse Company for any personal use thereof. During the same period, Company
shall provide Employee, at no cost to Employee, one private-reserved covered
parking space located in or close to the building in which Employee's office is
located.
3
<PAGE>
(f) Accounting Services. At an appropriate time each
year during the term of Employee's employment with Company under this Agreement,
Company shall make available to Employee, at no cost to Employee, the services
of the certified public accounting firm which audits Company's financial
statements for the purpose of preparing all of Employee's federal, state and
local income tax and estimated income tax returns for such year and counselling
Employee with respect thereto. Employee hereby acknowledges that Company shall
bear no responsibility for the accuracy, quality or completeness of any such tax
returns prepared by such certified public accounting firm.
(g) Financial Planning Services. During the term of
Employee's employment with Company under this Agreement, Company shall furnish
Employee, at no cost to Employee, ten (10) hours per year of financial
counselling services. The services shall be rendered by any national accounting
firm or firms with which Company from time to time has an ongoing relationship
for the purpose of providing financial counselling in conjunction with Company's
outplacement services, providing that such firm has a Philadelphia, Pennsylvania
office, or if and for as long as there is no such firm, by a financial
counsellor or financial counselling firm selected by Employee and approved by
Company.
(h) Withholding Taxes. The Base Salary, Incentive
Payments and all other cash and non-cash payments to Employee hereunder shall be
subject to, and paid net of all applicable withholding requirements of federal,
state and local law.
5. Expenses. Company will reimburse Employee for all
reasonable expenses incurred by Employee in connection with the performance of
Employee's duties upon receipt of vouchers therefore and in accordance with
Company's regular reimbursement procedures and practices in effect from time to
time.
6. Severance Compensation.
(a) In the event of a "Compensated Termination" (as
that term is defined below), Company shall pay Employee as severance
compensation, payable in equal monthly installments (with properly pro rated
payments for periods of less than a full month) during the "Section 6 Period"
(as that term is hereafter as defined), an amount equal to the greater of: (i)
the Base Salary plus Incentive Payments paid to Employee during the 12 month
period immediately preceding such Compensated Termination; or (ii) Four Hundred
Fifty Thousand ($450,000) Dollars. As used herein the term "Compensated
Termination" shall mean any one of the following events:
I. Company elects to terminate Employee's employment
under this Agreement pursuant to the provisions of Section 3(b) hereof at the
end of the initial term or any renewal tern hereof;
II. Company at any time other than the end of initial
term or any renewal term hereof terminates the employment of Employee under the
Agreement, otherwise than as provided in Section 10 ("Discharge for Cause")
hereof; or
4
<PAGE>
III. Employee terminates his employment with Company
pursuant to Section 11 hereof.
As used herein, the term "Section 6 Period" shall mean the longer of: (i) one
year from the date a Compensated Termination occurs; or (ii) the period
beginning on the date a Compensated Termination occurs and ending on the date
upon which the then current term of Employee's employment with Company, as such
term may have been extended pursuant to Section 3(c) hereof, would have ended
but for the occurrence of the Compensated Termination.
(b) In the event of a Compensated Termination, for
the entire Section 6 Period, Company shall continue to provide, at no cost to
Employee, life, medical and dental insurance to Employee providing coverages
equal to the coverages made available to Employee and his dependents on the date
of the termination of his employment.
(c) In the event that any part of any payment or
benefit to Employee under Sections 6(a) and 6(b) of the Agreement or under this
Section 6(c) or any other payment made or benefit conferred by Company to
Employee constitutes an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and any
regulations or other authorities relating thereto, but excluding payments which
are described in Section 280G(b)(2)(B) of the Code, Company will pay to Employee
as additional compensation (i) the amount of all taxes due from Employee under
Section 4999 of the Code and (ii) the amount equal to all federal, state and
local income taxes and business privilege taxes based upon net income
(collectively, the "Taxes") due from Employee upon all payments made by Company
to Employee under this Section 6(c). It is the intention of the parties that
Employee receive all payments and benefits from Company net of the tax under
Section 4999 of the Code and net of all taxes due upon all payments under this
Section 6(c), and the terms of this Section 6(c) shall be construed and
implemented by the parties to effectuate this intent.
(d) Notwithstanding anything to the contrary
contained above in this Section 6 or any other portion of this Agreement, the
Company shall not be required to make any of the payments or provide any of the
other benefits set forth above in this Section 6 or otherwise on account of any
Compensated Termination unless and until Employee has, if the Company so
requests after Employee's termination, resigned from the Boards of Directors
(and/or any committees thereof) of the Company and any affiliates of the
Company, all as requested by the Company.
7. Disability.
(a) If Employee becomes unable to perform his duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any similar cause, Company will continue
the payment of Employee's total compensation at its then current rate for a
period of three (3) months following the date Employee is first unable to
perform his duties due to such disability or incapacity. Thereafter, Company
shall have no obligation for the Base Salary or other compensation payments to
Employee during the continuance of such disability or incapacity, except that
Company shall pay to Employee, based upon the portion of the calendar year that
Employee was able to perform his duties prior to the disability, the pro rata
portion of the Incentive Payments that Employee would have earned if he had
remained in the employ of the Company for the full calendar year (payable at
such time that Employee would have received such Incentive Payment). Employee
shall receive such benefits, if any, as are then provided under Company's
standard disability coverage provided to employees generally, if and only if the
same is then in effect.
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(b) If Employee is unable to perform his duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any similar cause for a period of six (6)
consecutive months, Company shall have the right to terminate this Agreement at
any time thereafter, in which event Company shall have no further obligations or
liabilities hereunder after the date of such termination.
8. Death. If Employee dies, all payments hereunder shall
continue for a period of three (3) months after the end of the week in which
Employee's death shall occur, at which point such payments shall cease and
Company shall have no further obligations or liabilities' hereunder to
Employee's estate or legal representative or otherwise, except that Company
shall pay to Employee's estate or legal representative, based upon the portion
of the calendar year that Employee was employed by Company prior to his death,
the prorated portion of the Incentive Payments Employee would have earned if he
had remained in the employ of Company for the full calendar year (payable at
such time that Employee would have received such Incentive Payment).
9. Non-Competition, Trade Secrets, etc.
(a) During the term of this Agreement and for a
period of two (2) years after the termination of such Agreement, Employee shall
not directly or indirectly induce or attempt to influence any employee of
Company to terminate his employment with Company and shall not engage in (as a
principal, partner, director, officer, agent, employee, consultant or otherwise)
or be financially interested in any business operating within the continental
United States, which business is involved in business activities which are the
same as, similar to or in competition with business activities carried on by
Company, or being definitely planned by Company, at the time of such
termination. For purposes of this Section 9, Company's business activities shall
include, without limitation, the following: corporate outplacement, consulting,
and career consulting for employees, including spouse placement, career
assessment, second career planning, and career options planning, career
development, and consulting or the subjects of termination, severance policies,
and retirement planning, reporting, evaluation, advisory, and communications
services, and other human resources consulting and personnel services to client
organizations; and any other such products, programs, and services as Company
may hereafter commence marketing in the area of human resource consulting.
(b) For a similar period of two (2) years after
termination of this Agreement, Employee shall not contact directly or indirectly
or cause to be contacted directly or indirectly any clients or customers of
Company for the purpose of competitively soliciting business in competition with
Company. Without limiting the foregoing, for a period of two (2) years after
termination of this Agreement, Employee shall not competitively solicit business
from clients, customers or competitors of Company within the continental United
States through the means or use of property in which Company has an ownership
interest or a license pursuant to Section 9(d) hereof.
(c) During the term of this Agreement and at all
times thereafter, Employee shall not use for Employee's personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company other than Company, any information
regarding the business methods, business policies, procedures, techniques,
research or development projects or results, trade secrets, or other knowledge
or processes used or developed by Company or any name or addresses of customers
or clients or any data on or relating to past, present or prospective customers
or clients or any other confidential information relating to or dealing with the
business operations or activities of Company, made known or learned or acquired
by Employee while in the employ of Company.
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(d) Any and all writings, inventions, improvements,
computer programs, processes, procedures or techniques (hereinafter
"Inventions") which Employee may make, discover or develop either solely or
jointly with any other person or persons (hereinafter "Co-Inventor(s)") at any
time during the term of and as part of his employment with Company which relate
to any business being conducted or carried on by Company at the time of
invention shall be the sole and exclusive property of Company, subject to the
rights of the Co-Inventor(s) in the Inventions. Any and all Inventions which
Employee may make, discover or develop either solely or jointly with any
Co-Inventor(s) other than a part of his employment with Company which are useful
in connection with any business being conducted, carried on or definitely
planned by Company at the time of invention shall be subject to a perpetual
license to Company, subject to any rights of Co-Inventor (s). The amount of the
royalty shall be agreed upon by Company and Employee. In the event that they
cannot agree, such royalty shall be determined by arbitration by three
arbitrators, one selected by Company, one selected by Employee and the third
selected by the first two arbitrators. During the term of this Agreement,
Employee shall make full disclosure to Company of all such Inventions. It shall
be presumed that any Inventions which Employee shall make, discover or develop
either solely or jointly with any Co-Inventor(s) during the two-year period
after termination of his employment with Company shall have been developed in
part during the term of employment, and Employee shall have the burden of proof
in demonstrating that no such development occurred during such term of
employment. With respect to those Inventions as to which Company is to acquire
title hereunder, Employee shall do everything necessary or desirable to vest
such title in Company, and Employee shall write and prepare all specifications
and procedures regarding such Inventions and otherwise aid and assist Company so
that Company can prepare and present applications for copyrights or patents
therefor and can secure such copyrights or patents wherever possible, as well as
reissues, renewals and extensions thereof, and can obtain record title to such
copyright or patents in all countries in which it may desire to have copyright
or patent protection. Employee shall not be entitled to any additional or
special compensation for rights to Inventions which Company acquires hereunder.
(e) Employee also agrees, during the term of this
Agreement and thereafter, not to disparage or deprecate, directly or indirectly,
the reputation, professionalism, character, competence, integrity or motives of
the Company, any subsidiary or any affiliate thereof, or any of their officers,
trustees, directors, employees, attorneys, agents or family members.
(f) Employee acknowledges that the restrictions
contained in this Section 9, in view of the nature of the business in which
Company is engaged, are reasonable and necessary in order to protect the
legitimate interests of Company, and that any violation thereof would result in
irreparable injuries to Company, and Employee therefore acknowledges that, in
the event of his violation of any of these restrictions, Company shall be
entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief a well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
will be cumulative and in addition to any other rights or remedies to which
Company may be entitled.
(g) If the period of time or the area specified in
this Section 9 should be adjudged unreasonable in any proceeding, then the
period of time shall be reduced by such number of months or the area shall be
reduced by the elimination of such portion thereof or both so that such
restrictions may be enforced in such area and for such time as is adjudged to be
reasonable. If Employee violates any of the restrictions contained in the
foregoing subparagraph (a), the restrictive period shall not run in favor of
Employee from the time of the commencement of any such violation until such time
as such violation shall be cured by Employee to the satisfaction of Company.
10. Discharge for Cause. Company may discharge Employee at any
time for criminal conduct (whether or not related to Employee's employment),
gross negligence, any violation of any express direction or any reasonable rule
or regulation established by Company's Board from time to time regarding the
conduct of its business, or any violation by Employee of the terms and
conditions of this Agreement, in which event Company shall have no further
obligations or liabilities hereunder after the date of such discharge.
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11. Compensated Termination by Employee. The occurrence of any
of the following events shall give Employee grounds to effect a Compensated
Termination under Section 6 hereof:
(a) Employee is not elected or reelected, as the case
may be, to the executive offices of Company when and as specified in Section 1
hereof or his responsibilities as an executive officer, employee and Board
member of Company are materially changed by Company without Employee's prior
written consent;
(b) At any time during the term of his employment
with Company, the removal of Employee from membership on the Board or the
failure of the shareholders of Company to reelect Employee to the Board;
(c) Company, without the consent of Employee,
relocates its corporate headquarters offices outside of the Philadelphia
Metropolitan Statistical Area, as such term is defined by the Office of
Management and Budget, or bases Employee elsewhere than in its corporate
headquarters offices;
(d) Any material reduction in the facilities, staff
and support services made available to Employee by Company at any time provided
that such reduction was made without the consent of Employee.
Employee may effect a Compensated Termination only if Employee shall
terminate his employment with Company for any of the reasons set forth within
thirty (30) days of the date he discovers the existence of the event which gives
rise to his right of termination, by giving notice of termination to Company.
12. Indemnification. At all times during and after Employee's
employment with Company, Company shall indemnify Employee against expenses
(including legal fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him, to the extent now or hereafter
permitted by law and Company's By-Laws, in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, brought or threatened to be brought against
him, including actions or suits by or in the right of Company, by reason of the
fact that he is or was a director, officer, employee or agent of Company, its
parent or any of its subsidiaries, or acted as a director, officer, employee or
agent or in any other capacity on behalf of Company, its parent or any of its
subsidiaries or is or was serving at the request of Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, provided that Employee acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
Company and, with respect to any criminal proceeding, Employee had no reasonable
cause to believe his conduct was unlawful. Company shall pay expenses incurred
by Employee in defending such a civil or criminal action, suit or proceeding in
advance of the final disposition of such suit or proceeding upon receipt of an
undertaking by or on behalf of Employee to repay such amount if it is ultimately
determined that he is not entitled to be indemnified by Company as authorized by
Company's By-Laws or by law.
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13. Travel. In all travel for Company to locations two
thousand (2,000) miles or more distant from Philadelphia, Pennsylvania, Employee
shall be entitled to business class travel accommodations at his option; for
travel for Company to locations five thousand (5,000) miles or more distant from
Philadelphia, Pennsylvania, Employee shall be entitled to first class
accommodations at his option.
14. Company Property.
(a) All counseling, advertising, sales, and other
materials or articles of information, including without limitation data
processing reports, customer sales analyses, invoices, price lists or
information, samples or any other materials or data of any kind furnished to
Employee by Company or developed by Employee on,behalf of Company or at
Company's direction or for Company s use or otherwise in connection with
Employee's employment hereunder, are and shall remain the sole and confidential
property of Company; if Company requests the return of such materials at any
time during or at or after the termination of Employee's employment, Employee
shall immediately deliver the same to Company.
(b) Upon the termination of employment for any reason
other than for cause or the death of Employee, Employed shall have the option,
exercisable only by written notice given to Company within twenty (20) days
after termination of employment (i) to acquire any automobile then being used by
Employee and owned by Company for a purchase price equal to the then book value
of such automobile, as determined by Company or (ii) to acquire Company's
leasehold rights to any such automobile leased by Company (if, and only if, the
lessor agrees to such acquisition without requiring any payment or guarantee or
any other concessions by Company) by assuming, and agreeing to hold Company
harmless against, all of Company's obligations with respect thereto accruing
from and after the date that the transfer of title takes place. Employee shall
pay all sales and use taxes relating to any such sale or acquisition. Closing of
any such acquisition by Employee shall take place at such time as shall be
mutually agreeable to the parties, but in no event more than twenty (20) days
after the exercise of this option, at such place as Company shall specify.
15. Prior Agreements. Employee represents to Company (a) that
there are no restrictions, agreements or understandings whatsoever to which
Employee is a party which would prevent or make unlawful his execution of this
Agreement or his employment hereunder, (b) that his execution of this Agreement
and his employment hereunder shall not constitute a breach of any contract,
agreement or understanding, oral or written, to which he is a party or by which
he is bound and (c) that he is free and able to execute this Agreement and to
enter into employment by Company.
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16. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor the
delay on the part of either party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as.a waiver of such right, remedy, power
or privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of
such state or other jurisdiction to the contrary, and without the aid of any
canon, custom or rule of law requiring construction against the draftsman.
(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received two days
following the day when deposited with an overnight courier service such as
Federal Express, for delivery to the intended addressee or two days following
the day when deposited in the United States mails, registered mail return
receipt requested, addressed as set forth below:
(i) If to Employee:
Mr. Richard J. Pinola
1322 North Tulip drive
West Chester, PA 19380
(ii) If to Company:
Right Management Consultants, Inc.
1818 Market Street
14th Floor
Philadelphia, PA 19107
Attention: President
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
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(d) Binding Nature of Agreement. This Agreement shall
be binding and inure to the benefit of Company and its successors and assigns
and shall be binding upon Employee, his heirs and legal representatives.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories. Any photographic or xerox copy of this Agreement, with all
signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as if it were an executed counterpart of this
Agreement.
(f) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(g) Entire Agreement. This Agreement constitutes the
entire understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or condition, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
(h) Paragraph Headings. The paragraph headings in
this Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
(i) Gender, Etc. Words used herein, regardless of the
number of gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context indicates is appropriate.
(j) Number of Days. In computing the number of days
for purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or holiday.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /s/ Joseph T. Smith
----------------------------
President
/s/ Richard J. Pinola (SEAL)
------------------------------
Richard J. Pinola, Employee
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EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 12th day of December, 1995, by and
between RIGHT MANAGEMENT CONSULTANTS, INC., a Pennsylvania corporation
(hereinafter called "Company"), and JOSEPH T. SMITH, an individual (hereinafter
called "employee").
WITNESSETH:
Company desires to employ Employee, and employee desires to be employed
by Company, on the terms and conditions hereinafter stated.
NOW THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Company and
Employee agree as follows:
1. Employment. Company hereby employs Employee and employee
hereby accepts employment by Company for the period and upon the terms and
conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall serve Company as its President and
Chief Operating Officer ("COO"), and, subject to continued election thereto by
the Company's shareholders, as a member of Company's Board of Directors (the
"Board"). The powers, authority and duties of the offices of President and COO
of Company shall be those customary to such offices with corporations comparable
to Company.
(b) Throughout the term of this Agreement, Employee
shall devote his entire working time, energy, skill and best efforts to the
performance of his duties hereunder in a manner which will faithfully and
diligently further the business and interests of Company.
3. Term.
(a) The initial term of Employee's employment with
Company under this Agreement shall be as of January 1, 1996 and continuing up to
and through December 31, 1998.
(b) Unless either party gives written notice of its
intention to terminate Employee's employment under this Agreement at the end of
the initial or any renewal term by giving the other party such notice, at least
one hundred twenty (120) days prior to the expiration of the then current term,
employee's employment under this Agreement shall be deemed to have been renewed
for an additional term of one (1) year commencing on the day after the
expiration of the then current term. Notwithstanding the foregoing, employee's
employment with Company will not be renewed under this Agreement on or after
December 31 of the calendar year in which Employee reaches sixty-five (65) years
of age.
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(c) Notwithstanding the provisions of Sections 3(a)
and 3(b) hereof, in the event that: (i) a "controlling interest" in the capital
stock of Company is sold in a single transaction or a group of related
transactions to one or more buyers acting in concert; (ii) Company sells all or
substantially all of its assets; or (iii) Company is a party to any corporate
merger or consolidation in which one or more parties acting in concert who did
not previously hold a "controlling interest" in the capital stock of Company
acquires or acquire such a "controlling interest" in the capital stock of
Company or its successor entity (each such a event to constitute a "Change in
Control"), Employee may, upon written notice to Company within sixty (60) days
of such Change in Control, elect to: (A) continue his employment with Company
for the greater of the then current term or a period that expires two years from
the date of the Change in Control; or (B) voluntarily terminate his employment
with Company and receive severance compensation as if this were a "Compensated
Termination" pursuant to Section 6 hereof for a "Section 6 Period" that expires
upon the later of the date the then current term would have expired but for the
earlier termination described herein or two years from the date of the Change in
Control. In the event that Employee elects to remain employed by Company
pursuant to (A) above, the total amounts payable annually to employee for the
period described in (A) shall be not less than the greater of: (I) the total
amount of the Base Salary and Incentive Payments paid under Sections 4(a) and
4(b) during the 12-month period for the calendar year immediately preceding the
Change in Control; or (II) Three Hundred Thousand ($300,000) Dollars. For the
purposes of this Section 3(c), a "controlling interest" in the capital stock
will constitute that number of shares which, as a practical matter, permits the
holder or holders to elect a majority of the members of the Board. It is agreed
that shares of capital stock possessing the right to cast a majority or more of
the votes entitled to be cast for the election of directors of Company shall
conclusively constitute a "controlling interest", but that a block of shares
possessing the right to cast less than a majority of the number of votes
entitled to be voted may, under the circumstances then pertaining, constitute a
"controlling interest".
4. Compensation and Benefits.
(a) Base Salary. For all of the service rendered by
Employee to Company, Employee shall receive a base salary (the "Base Salary")
payable at an annual rate equal to $300,000. Such Base Salary shall be payable
in reasonable periodic installments in accordance with Company's regular payroll
practices in effect from time to time. Employee's Base Salary is subject to
annual review and adjustment at the discretion of Company, but in no event shall
Company reduce the Base Salary to less than the amounts specified above during
the periods referred to without the consent of employee.
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(b) Incentive Payments. In addition to the Base
Salary, throughout the term of Employee's employment with Company hereunder,
Company shall pay to Employee annually, a cash bonus as incentive compensation
based upon Company's financial performance for that year ("Incentive Payments")
in such amounts as are decided upon by the Board or its Compensation Committee.
Any and all bonuses shall be determined based upon target and comparison that
are consistent with those to be used by the Board in determining the amounts
payable under Company's Incentive Compensation Plan for Senior Corporate Staff.
In the event that the employment of Employee terminates otherwise than pursuant
to this Section 4(b) or Section 6 hereof, on a day other than the last day of a
fiscal year of Company, in addition to Base Salary and other payments accrued
through the effective date of the termination, Company shall pay to Employee the
"pro rata portion" (as hereafter defined) of the Incentive Payments which would
have been due to Employee if he had remained in the employ of Company for the
full fiscal year in which his employment terminated. For purposes of the
immediately preceding sentence, the "pro rata portion" shall be obtained by
dividing the number of days (including intervening weekend days and holidays) in
the fiscal year that Employee was employed by Company by the number 365.
(c) Fringe Benefits. Throughout the term of this
Agreement and as long as they are kept in force by Company, employee shall be
entitled to participate in and receive the benefits of any profit sharing or
retirement plans and any health, life, accident or disability insurance plans or
programs made available to other similarly situated employees of Company and
shall be entitled to participate in the Supplemental Deferred Compensation
Program attached hereto as Exhibit "A", but the participation of employee, if
any, in Company's stock option, stock appreciation, "phantom" stock plans or
similar plans, will be wholly within the discretion of the Board. With respect
to the term of Employee's employment with Company under this Agreement, the
Board has not made any determination with regard to Employee's participation in
any stock option, stock appreciation, "phantom" stock plans or similar plans.
However, the Company shall consider each year whether or not Employee shall be
awarded any stock options. Company may, at its sole discretion add, delete or
change any stock option, stock appreciation, or phantom stock plans that
Employee may participate in upon notice to Employee. If this Agreement is not
renewed by Company after the expiration of the then current term, Company shall
provide to Employee outplacement consulting services then generally being made
available by Company to executive candidates.
(d) Vacation. Employee shall be entitled to vacation
in accordance with Company's general policies with respect thereto from time to
time.
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(e) Automobile. During the term of Employee's
employment with Company under this Agreement, Company shall furnish Employee
with the use of a luxury automobile, insurance thereon, and the costs of fuel,
maintenance and necessary repairs as incurred. Employee shall be permitted
unrestricted use of such automobile without the obligation to account or
reimburse Company for any personal use thereof. During the same period, Company
shall provide Employee, at no cost to Employee, one private-reserved covered
parking space located in or close to the building in which Employee's office is
located.
(f) Accounting Services. At an appropriate time each
year during the term of Employee's employment with Company under this Agreement,
Company shall make available to Employee, at no cost to Employee, the services
of the certified public accounting firm which audits Company's financial
statements for the purpose of preparing all of Employee's federal, state and
local income tax and estimated income tax returns for such year and counselling
Employee with respect thereto. Employee hereby acknowledges that Company shall
bear no responsibility for the accuracy, quality or completeness of any such tax
returns prepared by such certified public accounting firm.
(g) Financial Planning Services. During the term of
Employee's employment with Company under this Agreement, Company shall furnish
Employee, at no cost to Employee, ten (10) hours per year of financial
counselling services. The services shall be rendered by any national accounting
firm or firms with which Company from time to time has an ongoing relationship
for the purpose of providing financial counselling in conjunction with Company's
outplacement services, providing that such firm has a Philadelphia, Pennsylvania
office, or if and for as long as there is no such firm, by a financial
counsellor or financial counselling firm selected by Employee and approved by
Company.
(h) Withholding Taxes. The Base Salary, Incentive
Payments and all other cash and non-cash payments to Employee hereunder shall be
subject to, and paid net of all applicable withholding requirements of federal,
state and local law.
5. Expenses. Company will reimburse Employee for all
reasonable expenses incurred by Employee in connection with the performance of
Employee's duties upon receipt of vouchers therefore and in accordance with
Company's regular reimbursement procedures and practices in effect from time to
time.
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6. Severance Compensation.
(a) In the event of a "Compensated Termination" (as
that term is defined below), Company shall pay Employee as severance
compensation, payable in equal monthly installments (with properly pro rated
payments for periods of less than a full month) during the "Section 6 Period"
(as that term is hereafter as defined), an amount equal to the greater of: (i)
the Base Salary plus Incentive Payments paid to Employee during the 12 month
period immediately preceding such Compensated Termination; or (ii) Three Hundred
Thousand ($300,000) Dollars. As used herein the term "Compensated Termination"
shall mean any one of the following events:
I. Company elects to terminate Employee's employment
under this Agreement pursuant to the provisions of Section 3(b) hereof at the
end of the initial term or any renewal tern hereof;
II. Company at any time other than the end of initial
term or any renewal term hereof terminates the employment of Employee under the
Agreement, otherwise than as provided in Section 10 ("Discharge for Cause")
hereof; or
III. Employee terminates his employment with Company
pursuant to Section 11 hereof.
As used herein, the term "Section 6 Period" shall mean the longer of: (i) one
year from the date a Compensated Termination occurs; or (ii) the period
beginning on the date a Compensated Termination occurs and ending on the date
upon which the then current term of Employee's employment with Company, as such
term may have been extended pursuant to Section 3(c) hereof, would have ended
but for the occurrence of the Compensated Termination.
(b) In the event of a Compensated Termination, for
the entire Section 6 Period, Company shall continue to provide, at no cost to
Employee, life, medical and dental insurance to Employee providing coverages
equal to the coverages made available to Employee and his dependents on the date
of the termination of his employment.
(c) In the event that any part of any payment or
benefit to Employee under Sections 6(a) and 6(b) of the Agreement or under this
Section 6(c) or any other payment made or benefit conferred by Company to
Employee constitutes an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and any
regulations or other authorities relating thereto, but excluding payments which
are described in Section 280G(b)(2)(B) of the Code, Company will pay to Employee
as additional compensation (i) the amount of all taxes due from Employee under
Section 4999 of the Code and (ii) the amount equal to all federal, state and
local income taxes and business privilege taxes based upon net income
(collectively, the "Taxes") due from Employee upon all payments made by Company
to Employee under this Section 6(c). It is the intention of the parties that
Employee receive all payments and benefits from Company net of the tax under
Section 4999 of the Code and net of all taxes due upon all payments under this
Section 6(c), and the terms of this Section 6(c) shall be construed and
implemented by the parties to effectuate this intent.
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<PAGE>
(d) Notwithstanding anything to the contrary
contained above in this Section 6 or any other portion of this Agreement, the
Company shall not be required to make any of the payments or provide any of the
other benefits set forth above in this Section 6 or otherwise on account of any
Compensated Termination unless and until Employee has, if the Company so
requests after Employee's termination, resigned from the Boards of Directors
(and/or any committees thereof) of the Company and any affiliates of the
Company, all as requested by the Company.
7. Disability.
(a) If Employee becomes unable to perform his duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any similar cause, Company will continue
the payment of Employee's total compensation at its then current rate for a
period of three (3) months following the date Employee is first unable to
perform his duties due to such disability or incapacity. Thereafter, Company
shall have no obligation for the Base Salary or other compensation payments to
Employee during the continuance of such disability or incapacity, except that
Company shall pay to Employee, based upon the portion of the calendar year that
Employee was able to perform his duties prior to the disability, the pro rata
portion of the Incentive Payments that Employee would have earned if he had
remained in the employ of the Company for the full calendar year (payable at
such time that Employee would have received such Incentive Payment). Employee
shall receive such benefits, if any, as are then provided under Company's
standard disability coverage provided to employees generally, if and only if the
same is then in effect.
(b) If Employee is unable to perform his duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness, injury or any similar cause for a period of six (6)
consecutive months, Company shall have the right to terminate this Agreement at
any time thereafter, in which event Company shall have no further obligations or
liabilities hereunder after the date of such termination.
8. Death. If Employee dies, all payments hereunder shall
continue for a period of three (3) months after the end of the week in which
Employee's death shall occur, at which point such payments shall cease and
Company shall have no further obligations or liabilities' hereunder to
Employee's estate or legal representative or otherwise, except that Company
shall pay to Employee's estate or legal representative, based upon the portion
of the calendar year that Employee was employed by Company prior to his death,
the prorated portion of the Incentive Payments Employee would have earned if he
had remained in the employ of Company for the full calendar year (payable at
such time that Employee would have received such Incentive Payment).
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9. Non-Competition, Trade Secrets, etc.
(a) During the term of this Agreement and for a
period of two (2) years after the termination of such Agreement, Employee shall
not directly or indirectly induce or attempt to influence any employee of
Company to terminate his employment with Company and shall not engage in (as a
principal, partner, director, officer, agent, employee, consultant or otherwise)
or be financially interested in any business operating within the continental
United States, which business is involved in the business activities which are
the same as, similar to or in competition with business activities carried on by
Company, or being definitely planned by Company, at the time of such
termination. For purposes of this Section 9, Company's business activities shall
include, without limitation, the following: corporate outplacement, consulting,
and career consulting for employees, including spouse placement, career
assessment, second career planning, and career options planning, career
development, and consulting or the subjects of termination, severance policies,
and retirement planning, reporting, evaluation, advisory, and communications
services, and other human resources consulting and personnel services to client
organizations; and any other such products, programs, and services as Company
may hereafter commence marketing in the area of human resource consulting.
(b) For a similar period of two (2) years after
termination of this Agreement, Employee shall not contact directly or indirectly
or cause to be contacted directly or indirectly any clients or customers of
Company for the purpose of competitively soliciting business in competition with
Company. Without limiting the foregoing, for a period of two (2) years after
termination of this Agreement, Employee shall not competitively solicit business
from clients, customers or competitors of Company within the continental United
States through the means or use of property in which Company has an ownership
interest or a license pursuant to Section 9(d) hereof.
(c) During the term of this Agreement and at all
times thereafter, Employee shall not use for Employee's personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company other than Company, any information
regarding the business methods, business policies, procedures, techniques,
research or development projects or results, trade secrets, or other knowledge
or processes used or developed by Company or any name or addresses of customers
or clients or any data on or relating to past, present or prospective customers
or clients or any other confidential information relating to or dealing with the
business operations or activities of Company, made known or learned or acquired
by Employee while in the employ of Company.
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<PAGE>
(d) Any and all writings, inventions, improvements,
computer programs, processes, procedures or techniques (hereinafter
"Inventions") which Employee may make, discover or develop either solely or
jointly with any other person or persons (hereinafter "Co-Inventor(s)") at any
time during the term of and as part of his employment with Company which relate
to any business being conducted or carried on by Company at the time of
invention shall be the sole and exclusive property of Company, subject to the
rights of the Co-Inventor(s) in the Inventions. Any and all Inventions which
Employee may make, discover or develop either solely or jointly with any
Co-Inventor(s) other than a part of his employment with Company which are useful
in connection with any business being conducted, carried on or definitely
planned by Company at the time of invention shall be subject to a perpetual
license to Company, subject to any rights of Co-Inventor (s). The amount of the
royalty shall be agreed upon by Company and Employee. In the event that they
cannot agree, such royalty shall be determined by arbitration by three
arbitrators, one selected by Company, one selected by Employee and the third
selected by the first two arbitrators. During the term of this Agreement,
Employee shall make full disclosure to Company of all such Inventions. It shall
be presumed that any Inventions which Employee shall make, discover or develop
either solely or jointly with any Co-Inventor(s) during the two-year period
after termination of his employment with Company shall have been developed in
part during the term of employment, and Employee shall have the burden of proof
in demonstrating that no such development occurred during such term of
employment. With respect to those Inventions as to which Company is to acquire
title hereunder, Employee shall do everything necessary or desirable to vest
such title in Company, and Employee shall write and prepare all specifications
and procedures regarding such Inventions and otherwise aid and assist Company so
that Company can prepare and present applications for copyrights or patents
therefor and can secure such copyrights or patents wherever possible, as well as
reissues, renewals and extensions thereof, and can obtain record title to such
copyright or patents in all countries in which it may desire to have copyright
or patent protection. Employee shall not be entitled to any additional or
special compensation for rights to Inventions which Company acquires hereunder.
(e) Employee also agrees, during the term of this
Agreement and thereafter, not to disparage or deprecate, directly or indirectly,
the reputation, professionalism, character, competence, integrity or motives of
the Company, any subsidiary or any affiliate thereof, or any of their officers,
trustees, directors, employees, attorneys, agents or family members.
(f) Employee acknowledges that the restrictions
contained in this Section 9, in view of the nature of the business in which
Company is engaged, are reasonable and necessary in order to protect the
legitimate interests of Company, and that any violation thereof would result in
irreparable injuries to Company, and Employee therefore acknowledges that, in
the event of his violation of any of these restrictions, Company shall be
entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief a well as damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
will be cumulative and in addition to any other rights or remedies to which
Company may be entitled.
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(g) If the period of time or the area specified in
this Section 9 should be adjudged unreasonable in any proceeding, then the
period of time shall be reduced by such number of months or the area shall be
reduced by the elimination of such portion thereof or both so that such
restrictions may be enforced in such area and for such time as is adjudged to be
reasonable. If Employee violates any of the restrictions contained in the
foregoing subparagraph (a), the restrictive period shall not run in favor of
Employee from the time of the commencement of any such violation until such time
as such violation shall be cured by Employee to the satisfaction of Company.
10. Discharge for Cause. Company may discharge Employee at any
time for criminal conduct (whether or not related to Employee's employment),
gross negligence, any violation of any express direction or any reasonable rule
or regulation established by Company's Board from time to time regarding the
conduct of its business, or any violation by Employee of the terms and
conditions of this Agreement, in which event Company shall have no further
obligations or liabilities hereunder after the date of such discharge.
11. Compensated Termination by Employee. The occurrence of any
of the following events shall give Employee grounds to effect a Compensated
Termination under Section 6 hereof:
(a) Employee is not elected or reelected, as the case
may be, to the executive offices of Company when and as specified in Section 1
hereof or his responsibilities as an executive officer, employee and Board
member of Company are materially changed by Company without Employee's prior
written consent;
(b) At any time during the term of his employment
with Company, the removal of Employee from membership on the Board or the
failure of the shareholders of Company to reelect Employee to the Board;
(c) Company, without the consent of Employee,
relocates its corporate headquarters offices outside of the Philadelphia
Metropolitan Statistical Area, as such term is defined by the Office of
Management and Budget, or bases Employee elsewhere than in its corporate
headquarters offices;
(d) Any material reduction in the facilities, staff
and support services made available to Employee by Company at any time provided
that such reduction was made without the consent of Employee.
Employee may effect a Compensated Termination only if Employee shall
terminate his employment with Company for any of the reasons set forth within
thirty (30) days of the date he discovers the existence of the event which gives
rise to his right of termination, by giving notice of termination to Company.
12. Indemnification. At all times during and after Employee's
employment with Company, Company shall indemnify Employee against expenses
(including legal fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him, to the extent now or hereafter
permitted by law and Company's By-Laws, in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, brought or threatened to be brought against
him, including actions or suits by or in the right of Company, by reason of the
fact that he is or was a director, officer, employee or agent of Company, its
parent or any of its subsidiaries, or acted as a director, officer, employee or
agent or in any other capacity on behalf of Company, its parent or any of its
subsidiaries or is or was serving at the request of Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, provided that Employee acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
Company and, with respect to any criminal proceeding, Employee had no reasonable
cause to believe his conduct was unlawful. Company shall pay expenses incurred
by Employee in defending such a civil or criminal action, suit or proceeding in
advance of the final disposition of such suit or proceeding upon receipt of an
undertaking by or on behalf of Employee to repay such amount if it is ultimately
determined that he is not entitled to be indemnified by Company as authorized by
Company's By-Laws or by law.
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<PAGE>
13. Travel. In all travel for Company to locations two
thousand (2,000) miles or more distant from Philadelphia, Pennsylvania, Employee
shall be entitled to business class travel accommodations at his option; for
travel for Company to locations five thousand (5,000) miles or more distant from
Philadelphia, Pennsylvania, Employee shall be entitled to first class
accommodations at his option.
14. Company Property.
(a) All counseling, advertising, sales, and other
materials or articles of information, including without limitation data
processing reports, customer sales analyses, invoices, price lists or
information, samples or any other materials or data of any kind furnished to
Employee by Company or developed by Employee on,behalf of Company or at
Company's direction or for Company s use or otherwise in connection with
Employee's employment hereunder, are and shall remain the sole and confidential
property of Company; if Company requests the return of such materials at any
time during or at or after the termination of Employee's employment, Employee
shall immediately deliver the same to Company.
(b) Upon the termination of employment for any reason
other than for cause or the death of Employee, Employed shall have the option,
exercisable only by written notice given to Company within twenty (20) days
after termination of employment (i) to acquire any automobile then being used by
Employee and owned by Company for a purchase price equal to the then book value
of such automobile, as determined by Company or (ii) to acquire Company's
leasehold rights to any such automobile leased by Company (if, and only if, the
lessor agrees to such acquisition without requiring any payment or guarantee or
any other concessions by Company) by assuming, and agreeing to hold Company
harmless against, all of Company's obligations with respect thereto accruing
from and after the date that the transfer of title takes place. Employee shall
pay all sales and use taxes relating to any such sale or acquisition. Closing of
any such acquisition by Employee shall take place at such time as shall be
mutually agreeable to the parties, but in no event more than twenty (20) days
after the exercise of this option, at such place as Company shall specify.
15. Prior Agreements. Employee represents to Company (a) that
there are no restrictions, agreements or understandings whatsoever to which
Employee is a party which would prevent or make unlawful his execution of this
Agreement or his employment hereunder, (b) that his execution of this Agreement
and his employment hereunder shall not constitute a breach of any contract,
agreement or understanding, oral or written, to which he is a party or by which
he is bound and (c) that he is free and able to execute this Agreement and to
enter into employment by Company.
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<PAGE>
16. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor the
delay on the part of either party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as.a waiver of such right, remedy, power
or privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of
such state or other jurisdiction to the contrary, and without the aid of any
canon, custom or rule of law requiring construction against the draftsman.
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<PAGE>
(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received two days
following the day when deposited with an overnight courier service such as
Federal Express, for delivery to the intended addressee or two days following
the day when deposited in the United States mails, registered mail return
receipt requested, addressed as set forth below:
(i) If to Employee:
Mr. Joseph T. Smith
728 Dodds Lane
Gladwyne, PA 19035
(ii) If to Company:
Right Management Consultants, Inc.
1818 Market Street
14th Floor
Philadelphia, PA 19107
Attention: Chairman of the Board; and
Chief Financial Officer
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(d) Binding Nature of Agreement. This Agreement shall
be binding and inure to the benefit of Company and its successors and assigns
and shall be binding upon Employee, his heirs and legal representatives.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories. Any photographic or xerox copy of this Agreement, with all
signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as if it were an executed counterpart of this
Agreement.
(f) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(g) Entire Agreement. This Agreement constitutes the
entire understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or condition, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
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(h) Paragraph Headings. The paragraph headings in
this Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
(i) Gender, Etc. Words used herein, regardless of the
number of gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context indicates is appropriate.
(j) Number of Days. In computing the number of days
for purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or holiday.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
RIGHT MANAGEMENT CONSULTANTS, INC.
By: /s/ Richard J. Pinola
----------------------------
Chairman of the Board
/s/ Joseph T. Smith(SEAL)
----------------------------
Joseph T. Smith, Employee
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EXHIBIT "A"
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
Supplemental Deferred Compensation Plan ("Plan") for Joseph T. Smith
("Employee") pursuant to Section 4(c) of the Employment Agreement dated as of
December 12th, 1995 (the "Employment Agreement") between Employee and Right
Management Consultants, Inc. ("Company"). Except as otherwise specified herein,
all terms used herein shall have the same meaning as such terms have in the
Employment Agreement.
1. Definitions.
A. "Age" shall mean the age of Employee as of his
last birthdate.
B. Compensation. "Compensation" shall mean
Employee's cash compensation, which includes Base Salary and Incentive Payments
only, earned by Employee in his capacity as an employee of Company with respect
to a Plan Year.
C. Deferred Benefit Account. "Deferred Benefit
Account" shall mean the account maintained on the books of Company for Employee
pursuant to Paragraph 2 hereof.
D. Determination Date. "Determination Date" shall
mean the last day of each Plan Year or such other dates as may be established by
the Committee.
E. Disability. "Disability" shall mean that Employee
is unable to perform his duties hereunder due to partial or total disability or
incapacity resulting from a mental or physical illness, injury or any similar
cause for a period of six (6) consecutive months. If there is any dispute as to
Employee's physical or mental disability, the question shall be settled by the
opinion of a duly licensed medical or osteopathic physician selected by the
mutual consent of Employee and Company or their representatives. Certification
of that physician as to the matter in dispute shall be final and binding upon
the parties.
F. Interest Yield. "Interest Yield" shall mean an
effective annual yield which, with respect to any calendar year, is a rate equal
to the annual interest rate of the two year guaranteed investment contract index
as published in the Wall Street Journal on the November 30 of that calendar
year. Company may, in its discretion and with notice to Employee no later than
November 15 of such calendar year, base the Interest Yield instead on a rate
that is consistent with annual interest rates used by Company in connection with
Company's other non-qualified deferred compensation plans for other senior
executives of Company.
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G. Plan Year. "Plan Year" shall mean the calendar
year.
H. Normal Retirement Date. "Normal Retirement Date"
shall mean the first date of the month following Employee's sixty-fifth (65th)
birthday.
I. Termination of Service. "Termination of Service"
shall mean Employee's ceasing to be an employee of the Company for any reason
other than death or discharge for cause pursuant to Section 10 of the Employment
Agreement.
2. Deferred Benefit Account.
A. Establishment of Account. Company shall establish
a Deferred Benefit Account on its books for Employee. The balance of Employee's
Deferred Benefit Account shall consist of the sum of all amounts credited to the
account pursuant to Paragraph 2B, less the sum of all distributions and benefit
payments made to Employee. Employee's Deferred Benefit Account shall be utilized
solely as a device for the measurement and determination of the amounts to be
paid to Employee pursuant to the plan.
B. Credits to Account. Company shall credit
Employee's Deferred Benefit Account with the following amounts at the times
specified:
(1) Five percent (5%) of Compensation credited as of
the Determination Date, provided, however, that (i) the amount credited may be
reduced, at the discretion of Company, by the amount Company is required to
withhold under any federal, state or local law for taxes or other charges.
(2) As of the Determination Date, an amount equal to
the interest earned since the last preceding Determination Date. For purposes of
the foregoing, interest earned shall be calculated by applying the Interest
Yield, reduced to a nominal monthly rate, to the average daily balance of the
Deferred Benefit Account since the last preceding Determination Date.
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3. Vesting of Deferred Benefit Account Balance.
Employee shall be vested in the Deferred Benefit Account
balance according to the following schedule.
Age % Vested
--- --------
61 20%
62 40%
63 60%
64 80%
65 100%
Notwithstanding the above schedule, Employee shall become fully-vested
upon Employee's Death, Disability or Termination of Service. The Board may elect
to accelerate the Age or time in which Employee can become fully vested in the
Deferred Benefit Account balance.
4. Benefits.
A. Retirement Benefits. Upon Employee's Termination
of Service on or after his Normal Retirement Date, provided that Employee
continuously served Company as an employee to that time, Employee shall receive,
as deferred compensation for services rendered prior to such date, a benefit
equal to the amount of his Deferred Benefit Account balance (determined in
accordance with Paragraph 2B(2)), payable as a life annuity in equal monthly
installments with interest on the unpaid balance at a rate equal to the Interest
Yield. Such annuity payments shall be based upon the 1983 Group Annuity
Mortality tables.
B. Benefits Upon Early Termination of Service. Upon
Employee's Termination of Service prior to his Normal Retirement Date, Employee
shall receive, as deferred compensation for services rendered prior to such
date, a benefit equal to the amount of his Deferred Benefit Account balance
(determined in accordance with Paragraph 2B(2)), payable in a lump sum within
one (1) month of such Termination of Service; provided however, that Company
may, at Company's sole option, elect to retain in the Deferred Benefit Account
that amount of the Deferred Benefit Account Balance in excess of $100,000 to be
payable to Employee as a life annuity in equal monthly installments with
interest on the unpaid balance at a rate equal to the Interest Yield, beginning
on the first day of the month after the date that would have been Employee's
Normal Retirement Date had such Termination of Service not earlier occurred.
Company shall notify Employee of such an election prior to the date the lump sum
payment is due. The annuity payments shall be based upon the 1983 Group Annuity
Mortality tables.
C. Disability.
If Employee suffers a Disability prior to Termination
of Service and before receiving any benefits under Paragraph 4A, Employee's
beneficiary shall receive payment equal to the amount of Employee's Deferred
Benefit Account balance (determined in accordance with Paragraph 2B(2)), in a
lump sum within one (1) month of the date of Employee's Disability. Payment of
such benefit shall relieve Company of the obligation to pay any other benefit
which Employee would have otherwise received under this plan.
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D. Survivorship Benefits.
(1) Prior to Commencement of Retirement Benefits. If
Employee dies prior to Termination of Service and before receiving any benefits
under Paragraph 4A, Employee's beneficiary shall receive payment equal to the
amount of Employee's Deferred Benefit Account balance (determined in accordance
with Paragraph 2B(2)), in a lump sum within one (1) month of the date of
Employee's death. Payment of such benefit shall relieve Company of the
obligation to pay any other benefit which Employee would have otherwise received
under this plan.
(2) After Commencement of Benefits. If Employee dies
after benefit payments under Paragraphs 4A or 4B have commenced, Company shall
continue to pay the remaining payments to Employee's beneficiary in accordance
with the payment terms and schedule in effect at the time of death until the
full balance of the Deferred Benefit Account are paid.
E. Commencement of Payments. Benefit payments
required under Paragraphs 4A, 4B, 4C or 4D shall commence on the first day of
the month following the Employee's Termination of Service, Disability or death,
as the case may be.
F. Special Distributions. The foregoing provisions
of this Paragraph 4 notwithstanding, Company may, in its sole discretion, make
distributions to Employee or beneficiaries in a lump sum or in such other
payment forms not provided for in Paragraphs 4A, 4B, 4C or 4D. Any such
distribution shall reduce the Deferred Benefit Account balance of Employee or
beneficiary by the amount of the distribution.
5. Beneficiaries.
A. Designation. Employee shall designate a
beneficiary or beneficiaries to receive any benefits payable on his behalf after
his death by delivering a written notice of such designation to Company in such
form as Company shall prescribe. Employee may revoke or modify the designation
at any time by a further written designation. Employee's beneficiary designation
shall be deemed automatically revoked in the event the designated beneficiary
predeceases Employee. If no designation shall be in effect at the time when any
benefits payable to a beneficiary under this plan shall become due, the
beneficiary shall be the spouse of Employee, or if no spouse is then living, the
beneficiaries shall be the Employee's children, per stirpes, or, if none, all
payments under this plan shall be made to Employee's estate.
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<PAGE>
B. Payments to Minors and Incompetents. In the event
Employee is an incompetent, or a benefit is payable to a beneficiary who is a
minor or person declared incompetent, or who is a person incapable of handling
the disposition of his property, Company may pay such benefit to the guardian or
legal representative, or if none, to any other person having the care or custody
of the Employee or beneficiary. Company may require such proof of incompetency,
minority, legal custody, guardianship, etc. as it deems appropriate prior to
distribution of the benefit. Such distribution shall completely discharge
Company and its officers and directors from all liability with respect to such
benefit.
6. Benefits Subject to Company's Creditors. Any amounts
subject to this plan, shall be subject to claims of general creditors of
Company. The right of Employee or his beneficiary to receive payment of plan
benefits from Company assets shall be solely that of a general, unsecured
creditor of Company.
7. Change of Control. Notwithstanding the provisions of
Paragraph 6, in the event that: (i) a "controlling interest" in the capital
stock of Company is sold in a single transaction or a group of related
transactions to one or more buyers acting in concert, (ii) Company sells all or
substantially all of its assets, or (iii) Company is a party to any corporate
merger or consolidation in which one or more parties acting in concert who did
not previously hold a "controlling interest" in the capital stock of Company
acquires or acquire such a "controlling interest" in the capital stock of
Company or its successor entity (individually and collectively a "Change in
Control"), Company shall establish a trust agreement and shall from time to time
transfer into the trust sufficient assets to meet Company's obligation to pay
Plan benefits to Employee and his beneficiaries. The Agreement under which the
trust is created shall provide that the trustee shall hold the trust assets
separate and apart from the other assets of Company; the trust shall not
terminate until all benefits payable under this Plan are actually paid to trust
beneficiaries or Company is no longer obligated to pay benefits to Employee
under this Plan pursuant to Section 9 hereof; and that the trust shall be
structured so that Employee shall not be charged with income, for Federal and
state income tax purposes, at the time the trust is funded or upon the lapse of
the noncompetition forfeiture provision of Section 9 hereof (so as to be
structured as what is commonly referred to as a "Rabbi Trust"). At the
termination of the trust, trust assets not needed to pay benefits under the Plan
shall be returned to Company. In addition, if there shall be a Termination of
Service within two (2) years of a Change in Control, Employee shall be entitled
to begin receiving retirement benefits under this Plan as if Employee had
reached the Normal Retirement Date at or prior to such termination. For the
purposes of this Paragraph 7, a "controlling interest" in the capital stock will
constitute that number of shares which, as a practical matter, permits the
holder or holders to elect a majority of the members of the Board. It is agreed
that shares of capital stock possessing the right to cast a majority or more of
the votes entitled to be cast for the election of directors of Company shall
conclusively constitute a "controlling interest", but that a block of shares
possessing the right to cast less than a majority of the number of votes
entitled to be voted may, under the circumstances then pertaining, constitute a
"controlling interest".
8. Amendment and Termination.
A. The Company may at any time amend or terminate
the Plan; provided, however, that the Deferred Benefit Account balance may not
be reduced or terminated thereby.
B. Notwithstanding any other provision of this Plan
to the contrary, upon the termination of this Plan for any reason, the Deferred
Benefit Account Balance at the time of such termination shall be determined in
accordance with Paragraph 2B(2) hereof.
5
<PAGE>
9. Non-Competition, Trade Secrets, etc.
If Employee shall act in such a manner as to, in Company's
judgment; violate the provisions of Section 9 of the Employment Agreement
("Non-Competition, Trade Secrets, etc."), Employee shall forfeit all benefits
accrued under this Plan and Company shall have no further obligations to
Employee hereunder.
10. Miscellaneous.
A. Assignment of Benefits. Neither Employee nor any
beneficiary under this plan shall have any right to assign, transfer, pledge or
otherwise encumber the right to receive any benefits hereunder, and any
attempted assignment, transfer, pledge or other encumbrance shall be void and
have no effect.
B. Employment Not Guaranteed by Plan. Neither this
plan nor any action taken hereunder shall be construed as giving Employee the
right to remain as an employee of Company for any period.
C. Tax Deduction. Company shall deduct from all
benefit payments all applicable federal, state or local taxes required by law to
be withheld from such payments.
D. Construction. This Plan shall be construed
according to the laws of the Commonwealth of Pennsylvania.
E. Form of Communication. Any election, claim,
notice or other communication required or permitted to be made by a Employee or
beneficiary under this plan shall be made in writing and in such form as shall
be prescribed by Company. Such communication shall be effective upon mailing if
sent first class mail, postage pre-paid, return receipt requested.
F. Captions. The captions at the head of a paragraph
of this plan are designed for convenience of reference only and are not to be
resorted to for the purpose of interpreting any provision of this Plan.
G. Entire Agreement. This plan constitutes the
entire understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings inducements or conditions, express or implied, oral or written,
except as herein contained.
ADOPTED as of this 12th day of December, 1995, pursuant to authority
vested in the undersigned officer.
RIGHT MANAGEMENT CONSULTANTS, INC.
By:/s/ Richard J. Pinola
----------------------------
Title: Chairman of the Board
6
<PAGE>
Right Management Consultants, Inc.
Exhibit 11 - Consolidated Earnings Per Share Calculation
For the Year Ended December 31,
1995 1994
---- ----
Earnings per common share
Primary and Fully Diluted EPS:
Primary EPS
- -----------
Net income $7,819,000 $5,714,000
========== ==========
Weighted average number of shares
issued and outstanding 3,989,000 3,947,000
Dilutive effect (excess of number
of shares issuable over number
of shares assumed to be
using the average market price
during the period) of
outstanding options 204,000 136,000
---------- ----------
Adjusted weighted average number
of shares outstanding 4,193,000 4,083,000
========== ==========
Earnings per common share $ 1.86 $ 1.40
========== ==========
Fully Diluted EPS
- -----------------
Net income $7,819,000 $5,714,000
========== ==========
Weighted average number of shares
issued and outstanding 3,989,000 3,947,000
Dilutive effect (excess of number
of shares issuable over number
of shares assumed to be
using the market price at the
end of the period) of
outstanding options
274,000 139,000
---------- ----------
Adjusted weighted average number
of shares outstanding 4,263,000 4,086,000
========== ==========
Earnings per common share $ 1.83 $ 1.40
========== ==========
<PAGE>
Right Management Consultants, Inc.
Selected Financial Data
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share and Office Data) Year ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Results of Operations (1)
Total revenue $ 114,005 $ 89,134 $ 70,726 $ 53,617 $ 48,021
Costs and expenses and Other 101,090 79,345 64,279 50,278 42,564
Income before income taxes 12,915 9,789 6,447 3,339 5,457
Net income 7,819 5,714 3,297 1,324 3,122
Earnings per share (2) $ 1.86 $ 1.40 $ .84 $ 0.34 $ 0.76
Weighted average number of
shares outstanding (in thousands) (2) 4,193 4,083 3,945 3,906 4,119
Balance Sheet Data
Working capital $ 13,134 $ 9,883 $ 8,940 $ 6,317 $ 5,736
Total assets $ 60,231 $ 48,969 $ 35,734 $ 25,262 $ 22,970
Long-term obligations $ 7,360 $ 6,004 $ 2,403 $ 2,831 $ 1,038
Stockholders' equity $ 33,626 $ 24,405 $ 18,032 $ 14,498 $ 13,316
================================================================================================================
Network Revenue (3) $ 152,382 $ 128,744 $ 105,441 $ 84,675 $ 77,815
Network Offices 126 127 110 97 85
</TABLE>
(1) See Note B to the consolidated financial statements for information
regarding acquisitions.
(2) Amounts presented have been retroactively restated for the Company's
three-for-two stock split effective November 10, 1995. (See Note I to the
Consolidated Financial Statements.)
(3) Network Revenue is comprised of Company-owned Office revenue and Affiliate
offices' revenue.
<TABLE>
<CAPTION>
Graph Data
<S> <C> <C> <C> <C> <C>
Network Revenue $ 152,382 $ 128,744 $ 105,441 $ 84,675 $ 77,815
Company Revenue $ 114,005 $ 89,134 $ 70,726 $ 53,617 $ 48,021
Earnings Per Share (2) $ 1.86 1.40 $ 0.84 $ 0.34 $ 0.76
Return on Equity 26.9% 26.9% 20.3% 9.5% 27.3%
</TABLE>
1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Right Management Consultants, Inc.:
We have audited the accompanying consolidated balance sheets of Right
Management Consultants, Inc. (a Pennsylvania corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. 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 Right Management
Consultants, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
January 31, 1996
2
<PAGE>
Right Management Consultants, Inc.
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,965 $ 9,156
Accounts receivable, trade, net of allowance for
doubtful accounts of $754 and $651 16,918 14,282
Royalties and fees receivable from Affiliates 4,303 3,119
Note receivable 233 286
Prepaid expenses 1,360 979
Deferred income taxes 600 621
-------- --------
Total current assets 32,379 28,443
-------- --------
Property and equipment, less accumulated depreciation of
$9,518 and $6,977 7,447 6,694
-------- --------
Other Assets:
Intangible assets, less accumulated amortization of $6,657
and $4,790 17,824 11,888
Deferred income taxes 1,221 394
Note receivable 146 435
Other 1,214 1,115
-------- --------
20,405 13,832
-------- --------
Total Assets $ 60,231 $ 48,969
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Line of credit $ 1,325 $ --
Current portion of long-term debt and other obligations 2,227 2,086
Accounts payable 3,643 3,354
Commissions payable 2,735 2,328
Accrued incentive compensation and benefits 3,543 5,521
Accrued redundancy costs 115 977
Other accrued expenses 2,222 1,963
Deferred income 3,435 2,331
-------- --------
Total current liabilities 19,245 18,560
Long-term debt and other obligations 5,741 4,707
-------- --------
Deferred compensation 1,619 1,297
-------- --------
Commitments and Contingent Liabilities (Notes D, F and H)
Stockholders' Equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued or outstanding
Common stock, $.01 par value; 20,000,000 shares authorized;
4,313,816 and 2,891,971 shares issued 43 29
Additional paid-in capital 7,655 6,544
Retained earnings 26,636 18,830
Cumulative translation adjustment (191) (481)
-------- --------
34,143 24,922
Less treasury stock, at cost, 252,952 shares (517) (517)
-------- --------
33,626 24,405
-------- --------
Total Liabilities and Stockholders' Equity $ 60,231 $ 48,969
======== ========
</TABLE>
3
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Income
(Dollars and Shares in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue:
Company Office revenue $ 109,741 $ 84,712 $ 66,868
Affiliate royalties 4,264 4,422 3,858
--------- --------- ---------
Total revenue 114,005 89,134 70,726
--------- --------- ---------
Costs and expenses:
Consultants' compensation 39,957 30,796 24,282
Company Office sales and consulting support 7,359 5,459 4,575
Company Office administration 39,562 31,164 24,320
General sales, consulting and administration 13,783 11,879 10,929
--------- --------- ---------
Total costs and expenses 100,661 79,298 64,106
--------- --------- ---------
Income from operations 13,344 9,836 6,620
--------- --------- ---------
Other income (expense):
Interest income 302 282 104
Interest expense (731) (329) (277)
--------- --------- ---------
(429) (47) (173)
--------- --------- ---------
Income before income taxes 12,915 9,789 6,447
Provision for income taxes 5,096 4,075 3,150
--------- --------- ---------
Net income $ 7,819 $ 5,714 $ 3,297
========= ========= =========
Earnings per share $ 1.86 $ 1.40 $ 0.84
========= ========= =========
Weighted average shares outstanding 4,193 4,083 3,945
========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Stockholders' Equity
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
Additional Cumulative Total
Common Stock Paid-in Retained Translation Treasury Stockholders'
Shares Par Value Capital Earnings Adjustment Stock Equity
------ --------- ------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1993 2,789,902 $ 28 $ 5,557 $ 9,819 $ (389) $ (517) $ 14,498
Stock options
exercised 55,460 1 210 -- -- -- 211
Tax benefit from
exercise of stock
options -- -- 168 -- -- -- 168
Translation adjustment -- -- -- -- (142) -- (142
Net income -- -- -- 3,297 -- -- 3,297
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31,
1993 2,845,362 29 5,935 13,116 (531) (517) 18,032
========= ========= ========= ========= ========= ========= =========
Stock options
exercised 46,609 -- 362 -- -- -- 362
Tax benefit from
exercise of stock
options -- -- 247 -- -- -- 247
Translation adjustment -- -- -- -- 50 -- 50
Net income -- -- -- 5,714 -- -- 5,714
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31,
1994 2,891,971 29 6,544 18,830 (481) (517) 24,405
========= ========= ========= ========= ========= ========= =========
Stock options
exercised 72,612 1 629 -- -- -- 630
Tax benefit from
exercise of stock
options -- -- 252 -- -- -- 252
Shares issued under
restricted stock awards 29,700 -- 230 -- -- -- 230
Three-for-two stock split
(includes rounding up
for fractional shares) 1,319,533 13 -- (13) -- -- --
Translation adjustment -- -- -- -- 290 -- 290
Net income -- -- -- 7,819 -- -- 7,819
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31,
1995 4,313,816 $ 43 $ 7,655 $ 26,636 $ (191) $ (517) $ 33,626
========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Net income $ 7,819 $ 5,714 $ 3,297
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,284 3,246 2,407
Deferred income taxes (93) (153) (465)
Compensation from restricted stock agreements 231 -- --
Other non-cash charges 492 442 226
Revenue recognized for assumption of incomplete contracts (630) (716) (112)
Provision for doubtful accounts 400 75 476
Changes in operating accounts:
Accounts receivable, trade and from Affiliates (3,504) (2,989) (4,726)
Prepaid expenses and other assets (787) (755) 224
Accounts payable and accrued expenses (2,333) 1,147 5,194
Commissions payable 366 (230) 868
Deferred income 1,090 734 604
------- ------- -------
Net cash provided by operating activities 7,335 6,515 7,993
Investing Activities:
Purchase of property and equipment (2,643) (2,921) (1,651)
Net cash paid for acquisitions (2,665) (1,628) (82)
------- ------- -------
Net cash utilized by investing activities (5,308) (4,549) (1,733)
Financing Activities:
Payment of long-term debt and other obligations (2,880) (1,855) (994)
Proceeds from stock issuances 630 362 211
------- ------- -------
Net cash utilized by financing activities (2,250) (1,493) (783)
Effect of exchange rate changes on cash and
cash equivalents 32 44 58
------- ------- -------
Increase (decrease) in cash and cash equivalents (191) 517 5,535
Cash and cash equivalents, beginning of year 9,156 8,639 3,104
------- ------- -------
Cash and cash equivalents, end of year $ 8,965 $ 9,156 $ 8,639
======= ======= =======
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 445 $ 219 $ 103
======= ======= =======
Income taxes $ 4,370 $ 4,721 $ 3,459
======= ======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business
Right Management Consultants, Inc. (the "Company"), which does business
under the name Right Associates(R), develops, markets and delivers career
management and human resource consulting services through a network of Company
Offices and franchisee offices ("Affiliates") located in the United States,
Canada and Europe. The Company is engaged in career management and other human
resource consulting services, with a primary emphasis in career transition
consulting. The Company primarily delivers its services to mid-size and large
industrial and service companies, with no concentration in specific companies or
industries.
Principles of consolidation
The consolidated financial statements include the accounts of Right
Management Consultants, Inc., and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Revenue recognition
The Company recognizes contract revenue and the related direct
compensation for the services provided by Company Offices upon the performance
of its obligations under consulting service contracts. Revenue and related
direct commission expense, recorded at the start of performance of services, are
deferred and recognized as the contracts are completed. All indirect costs are
charged to expense in the period in which the obligations are incurred.
7
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Franchise revenue
Royalties from the members of the Company's network arise from
agreements made with Affiliates, which generally operate exclusively in
designated regional locations. The terms of these agreements require the
Affiliates to provide services under the Company's service marks in accordance
with programs and standards developed by the Company. Affiliate royalties are
10% of each Affiliate's gross billings and are recorded when the Affiliate bills
its customers for services.
Property and equipment
Property and equipment is carried at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets, which
are generally three to seven years for furniture, fixtures and equipment and
five to ten years for leasehold improvements.
Intangible assets
Intangible assets consist of trademarks, contact lists, covenants not
to compete, Affiliate agreements and goodwill, acquired in acquisitions. The
Company periodically reviews its intangibles for realizability by analyzing the
projected cash flows and profitability of the acquired entities and adjusts the
net book value of the recorded assets when necessary. These intangible assets
are amortized on a straight-line basis as follows:
Asset Years
----- -----
Trademarks 5
Contact lists 5
Affiliate agreements 5
Covenants not to compete 5 to 10
Goodwill 15 to 40
Amortization of these intangibles amounted to $1,867,000, $1,501,000,
and $1,055,000 in 1995, 1994 and 1993, respectively.
Currency translation
The accounts of the international subsidiaries are translated in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translation", which requires that assets and liabilities of
international operations be translated using the exchange rate in effect at the
balance sheet date. The results of operations are translated at average exchange
rates during the year. The effects of exchange rate fluctuations in translating
assets and liabilities of international operations into U.S. dollars are
accumulated and reflected as the cumulative translation adjustment in
stockholders' equity. Transaction gains and losses are included in general
8
<PAGE>
RIGHT MANAGEMENT
CONSULTANTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
sales, consulting and administration for 1995, 1994 and 1993. There are no
material transaction gains or losses in the accompanying consolidated financial
statements for these three years.
Earnings per share
Earnings per share are computed based on the weighted average number of
Company common stock ("Common Stock") and Common Stock equivalent shares
outstanding during the year. Outstanding stock options are considered Common
Stock equivalents and are included in the computation of outstanding shares
using the Treasury Stock method, unless anti-dilutive.
Income taxes
The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes." In accordance with SFAS No. 109, the liability
method is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured using enacted
tax rates and laws that are expected to be in effect when the difference is
reversed.
Reclassifications
Certain amounts have been reclassified in the 1994 Consolidated Balance
Sheet to conform with the 1995 presentation.
New Accounting Standards
The Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of " in March 1995. This statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. This statement is
effective for financial statements for fiscal years beginning after December 15,
1995, with earlier adoption encouraged. The Company adopted SFAS No. 121 in
March 1995 and reviews on a regular basis the expected cash flows of its
operating subsidiaries. The initial adoption of SFAS No. 121 had no impact on
the Company's consolidated financial position or results of operations.
The Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" in October 1995. This statement allows
for two implementation options. One option is to recognize compensation expense
in the consolidated financial statements using a fair-value based method,
applied to virtually all stock-based compensation. The alternative would not
change the current intrinsic-value approach to expense recognition, but would
require pro forma disclosure in the notes to the consolidated financial
9
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
statements using the fair value method. The Company plans to adopt the pro forma
disclosure option in 1996.
NOTE B - ACQUISITIONS
Effective January 1, 1995 and October 1, 1995, the Company acquired the
assets of two former Affiliates of the Company, located in Cupertino, California
and Providence, Rhode Island, respectively. Effective April 1, 1995, the Company
acquired the outstanding stock of LM&P, SA ("LM&P") located in Paris, France.
The aggregate purchase price of these three acquisitions was
approximately $8,150,000, including costs of acquisition. The purchase price
exceeded the fair value of the net assets acquired by approximately $7,388,000.
These acquisitions were made for a combination of cash and non-cash items,
including the assumption of incomplete outplacement contracts and the present
value of future defined incentives. The assumption of incomplete outplacement
contracts resulted in revenue in 1995 of approximately $630,000. The future
defined incentives are contingent upon the results of the acquired entities
subsequent to the transactions and apply only to the acquisitions of the former
Cupertino Affiliate and LM&P. The present value of these determinable contingent
payments aggregated $3,530,000 and has been accounted for as part of the
purchase price. The estimated amounts for these incentives are included in
long-term debt and other obligations at December 31, 1995.
During 1994 and 1993 , the Company acquired the business and certain
assets of the career management consulting firm Jannotta, Bray & Associates,
Inc. ("JBA") and the assets and/or outstanding stock of four Affiliate
outplacement consulting firms. In connection with the acquisition of JBA, the
Company provided approximately $1,000,000 for closures of duplicate JBA offices,
severance payouts and other charges ("accrued redundancy costs"). Simultaneously
with this acquisition, the Company sold certain assets, including goodwill and
other intangible assets totaling approximately $1,019,000 associated with JBA's
Michigan operations, to the Company's Michigan Affiliate for $1,200,000 and had
a $700,000 note receivable from this Affiliate related to this sale. The
purchase price of these acquisitions was approximately $8,618,000 in 1994 and
$1,169,000 in 1993, including costs of acquisition. The purchase price of these
acquisitions exceeded the fair value of the net assets acquired by approximately
$8,200,000 and $1,104,000 in 1994 and 1993, respectively. These acquisitions
were made for combinations of cash and non-cash items. Non-cash items included
the assumption of incomplete outplacement contracts and the present value of
future defined incentives. The assumption of incomplete outplacement contracts
resulted in revenue recognition of $716,000 and $112,000 in 1994 and 1993,
respectively. The future defined incentives are contingent on the results of the
acquired entities subsequent to the transactions. The present value of these
determinable contingent payments aggregated $491,000 in 1994 and $375,000 in
1993 and have been accounted for as part of the purchase price. The remaining
amounts are included in long-term debt and other obligations at December 31,
1995.
10
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - ACQUISITIONS (Continued)
The following represents the assets acquired and liabilities assumed to
arrive at net cash paid for acquisitions discussed above for each of the three
years in the period ended December 31, 1995:
<TABLE>
(Dollars in Thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net assets acquired:
Accounts receivable $ 404 $ 242 $ --
Prepaid expenses and other assets 554 131 5
Fixed assets 522 1,211 60
Intangible assets 7,388 7,181 1,104
Note receivable from Michigan Affiliate -- 700 --
------ ------ ------
8,868 9,465 1,169
------ ------ ------
Net liabilities assumed:
Accounts payable and
accrued expenses 718 483 --
Assumption of incomplete contracts 630 716 112
------ ------ ------
1,348 1,199 112
Less : Accrued redundancy costs -- 1,000 --
Contingent payments 3,530 491 375
Net due from seller -- 147 --
Term loan payable to bank (Note D) 1,325 5,000 600
------ ------ ------
Net cash paid for acquisitions $2,665 $1,628 $ 82
====== ====== ======
</TABLE>
Each acquisition has been accounted for by the purchase method and the
operating results of each entity have been consolidated with the Company's
results since the effective date of the respective acquisition. The purchase
price of each acquisition has been allocated to the assets acquired based upon
their estimated fair value at the date of acquisition.
11
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - ACQUISITIONS (Continued)
The unaudited pro forma results of operations for each of the two years
in the period ended December 31, 1994, reflecting the combined results of the
Company and JBA as if the acquisition had occurred at January 1, 1993 are
presented below. The pro forma effect of the other 1994 and 1995 acquisitions on
the Company's results of operations as if they had been consummated at the
beginning of 1993 and 1994, respectively, is immaterial and has been omitted.
(Dollars in Thousands Except Per Share Data)
1994 1993
---- ----
Total revenue $98,547 $84,412
======= =======
Income before income taxes 9,743 5,800
======= =======
Net income 5,686 2,941
======= =======
Earnings per share 1.39 .75
======= =======
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
(Dollars in Thousands)
1995 1994
---- ----
Furniture and fixtures $14,182 $11,803
Computer equipment 691 492
Leasehold improvements 2,092 1,376
------- -------
16,965 13,671
Less accumulated depreciation 9,518 6,977
------- -------
$ 7,447 $ 6,694
======= =======
NOTE D - DEBT AND OTHER OBLIGATIONS
In August 1995, the Company amended its existing Amended and Restated
Revolving Credit and Term Loan Agreement (the "Revolving Credit Agreement") to
increase the maximum unsecured revolving line of credit, from its primary bank,
from $6,000,000 to $10,000,000. The Company utilized approximately $1,500,000 of
its revolving credit facility in connection with the acquisition of the former
Cupertino Affiliate which had been fully repaid as of December 31, 1995.
12
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE D - DEBT AND OTHER OBLIGATIONS (Continued)
Furthermore, for the acquisition of LM&P, the Company utilized 6.5
million French francs (or approximately $1,325,000) from the Revolving Credit
Agreement, the full balance of which was still outstanding as of December
31,1995. This loan is due on January 22, 1996 and bears interest at 6.75% per
annum.
Also drawn from the Revolving Credit Agreement were unsecured term
loans (the "Loans") of $900,000 and $600,000, respectively. The Loans were used
to fund the acquisitions of the Company's Boston and Atlanta Affiliate offices
in December 1992 and April 1993, respectively. As of December 31, 1995, $413,000
remains outstanding in total on these loans. In addition to its existing term
loan obligations under this Revolving Credit Agreement, letters of credit
totaling $159,000 had been utilized for the security of future lease payments.
Accordingly, the Company had $8,103,000 available under this revolving credit
facility at December 31, 1995. The Revolving Credit Agreement bears interest at
the bank's quoted overnight rate with a maximum rate of 1/4% under the prime
rate (6.75% at December 31, 1995), and is available to the Company until such
time as the bank gives notice of cancellation. Upon such notice, it expires
twelve months thereafter. The Company did not utilize any of the available
credit from the Revolving Credit Agreement during 1995 and 1994 other than for
the acquisitions described above.
In connection with the acquisition of JBA (Note B), the Company entered
into a five year $5,000,000 unsecured term loan (the "Term Loan") with its
existing primary bank.
Under both the Revolving Credit Agreement and the Term Loan, the major
covenants require the maintenance of certain minimum financial ratios and
restrict the level of indebtedness with other banks, as defined. At December 31,
1995, the Company is in compliance with all such covenants.
Long-term debt and other obligations consist of the following:
<TABLE>
(Dollars in Thousands)
December 31,
<S> <C> <C>
1995 1994
---- ----
Bank term loan, payable in 60 equal monthly principal
installments of $83,000 through August 31, 1999, bearing
interest at 8.36% per annum $3,667 $4,667
Bank term loan, payable in 48 equal monthly principal
installments of $19,000 through December 8, 1996,
bearing interest at 6.96% per annum 225 450
Bank term loan, payable in 48 equal monthly principal
installments of $13,000 through March 31, 1997,
bearing interest at 5.97% per annum 187 337
Obligations payable to third parties in connection with
acquisitions, noninterest-bearing and discounted at 7.5%-
10% per annum, due through 1999, estimated and contingent
on future operating results of regions where
acquired businesses are operating 3,889 1,339
------ ------
7,968 6,793
Less current portion 2,227 2,086
------ ------
$5,741 $4,707
====== ======
</TABLE>
13
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - DEBT AND OTHER OBLIGATIONS (Continued)
Aggregate maturities on long-term debt and other obligations for the
years subsequent to December 31, 1995 are as follows:
(Dollars in Thousands)
Year Ending December 31, Amount
------------------------ ------
1996 $2,227
1997 2,680
1998 2,394
1999 667
------
$7,968
======
14
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - INCOME TAXES
The provision for income taxes consists of the following:
(Dollars in Thousands)
Year Ended December 31,
1995 1994 1993
---- ---- ----
Current:
Federal $4,107 $3,185 $2,321
State 852 671 759
Foreign 551 459 535
------ ------ ------
5,510 4,315 3,615
------ ------ ------
Deferred:
Federal (85) (75) (344)
State (8) (66) (121)
Foreign -- (12) --
------ ------ ------
(93) (153) (465)
------ ------ ------
Utilization and benefit of foreign
operating loss carryforwards (321) (87) --
------ ------ ------
$5,096 $4,075 $3,150
====== ====== ======
The total tax provision for each year differs from the amount that
would have been provided by applying the statutory U.S. federal income tax rate
to income before income taxes and extraordinary item. The reconciliation of
these differences is as follows:
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Federal income tax rate 34% 34% 34%
State income taxes, net of federal tax benefit 4 4 6
Nondeductible expenses 1 1 5
Foreign earnings not subject to U.S. federal
income tax (3) (3) (4)
Foreign income taxes 4 5 8
Utilization and benefit of foreign operating
loss carryforwards (2) (1) --
Other 2 2 --
--- --- ---
40% 42% 49%
=== === ===
</TABLE>
Income before income taxes is comprised of domestic and foreign
components, respectively, as follows: 1995 -- $11,449,000 and $1,466,000;
1994 -- $8,855,000 and $934,000 and 1993 -- $4,694,000 and $1,753,000.
15
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - INCOME TAXES (Continued)
Deferred income taxes arise primarily as a result of utilizing
depreciation lives for income tax reporting that are in excess of those used for
financial reporting purposes, as well as recognizing deferred compensation
expense, the provision for doubtful accounts and certain accrued expenses for
financial reporting purposes, which are not currently deductible for income tax
purposes.
Taxes on income of international subsidiaries are provided at the tax
rates applicable to their respective tax jurisdictions. The Company's share of
the cumulative undistributed earnings of such subsidiaries was approximately
$2,413,000 and $1,785,000 at December 31, 1995 and 1994, respectively. No
provision has been made for additional income taxes on the undistributed
earnings of the international subsidiaries because earnings are expected to be
reinvested indefinitely in the subsidiaries' operations or because under
existing law, international tax credits would be available to substantially
reduce U.S. taxes payable in the event of distribution.
The deferred tax asset as of December 31, 1995 and 1994 is comprised of
the following:
(Dollars in Thousands)
1995 1994
------- -------
Current deferred tax asset:
Allowance for doubtful accounts $ 317 $ 279
Accruals not currently deductible for
income taxes 283 342
------- -------
600 621
------- -------
Non-current deferred tax asset:
Deferred compensation 665 317
Depreciation and amortization 160 77
Tax benefit of foreign net operating loss 301 391
Other 95 --
------- -------
1,221 785
------- -------
Less: Valuation reserve -- (391)
------- -------
Deferred tax asset $1,821 $1,015
======= ======
The reduction in the Company's valuation reserve in 1995 relates to the
utilization, benefit and expiration of certain foreign net operating losses. The
remaining foreign net operating losses begin to expire in 1997. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized. The amount of the deferred tax
asset
16
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - INCOME TAXES (Continued)
considered realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
NOTE F - EXECUTIVE BENEFIT AND COMPENSATION AGREEMENTS
The Company has a nonqualified supplemental executive retirement plan
(the "Plan") for its Founding Chairman. The Plan is designed to provide him with
retirement income based on past compensation, reduced by other retirement
sources.
The Company accounts for this Plan in accordance with the provisions of
SFAS No. 87, "Employer's Accounting for Pensions." SFAS No. 87 requires the
Company to recognize a liability equal to the amount by which the actuarial
present value of the accumulated benefit obligation exceeds the fair value of
the Plan's assets. This liability was approximately $910,000 and $1,127,000 for
1995 and 1994, respectively. As of December 31, 1995, and 1994, the Plan was
unfunded, therefore the recorded liability equals the present value of the
accumulated benefit obligation.
A discount rate of 7.25% and 7% was used in determining the present
value of the accumulated benefit obligation in 1995 and 1994, respectively.
The Company has a nonqualified supplemental executive retirement plan
for its Chief Executive Officer to which a percentage of compensation, including
base salary and incentive bonuses, is credited annually. Deferred amounts earn
annual interest equal to the two-year Guaranteed Investment Contract Index on
November 30 of the current plan year, or 6%, whichever is higher (6% and 7.53%
at November 30, 1995 and 1994 respectively). The account balance is payable as a
life annuity in equal monthly installments with interest on the unpaid balance
upon his termination of service with the Company. The Chief Executive Officer's
interest in the plan vests at the rate of 10% per year, which began in 1993. The
Company also maintains a life insurance policy on the lives of the Chief
Executive Officer and Founding Chairman with the Company as beneficiary. These
policies are included in the general assets of the Company.
The Company maintains employment agreements and incentive compensation
agreements with certain management employees. The agreements provide for
additional compensation over and above the individual's annual salary, based
upon the achievement of certain levels of overall Company, individual group or
region performance. These agreements provide for aggregate minimum annual
compensation for these employees of approximately $1,372,000 in 1996, $1,238,000
in 1997, $970,000 in 1998, $187,000 in 1999 and $90,000 in 2000.
17
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution savings plan, available to
substantially all employees, under Section 401(k) of the Internal Revenue Code.
Under this plan, the Company will contribute 25% of the participating employee's
annual contribution. In 1995 and 1994, in connection with achieving a certain
level of targeted Company profits, the Company contributed an additional 12.5%
of the participating employee's contribution for a total of 37.5%. Employee
contributions are generally limited to 10% of their compensation subject to
Internal Revenue Code limitations. Company contributions were approximately
$686,000, $489,000 and $230,000 for 1995, 1994 and 1993, respectively.
In addition, the Company maintains a nonqualified deferred compensation
plan for certain employees. Under the plan, participants may defer payment of up
to 10% of their annual cash compensation reduced by amounts contributed to the
Company's 401(k) plan. Deferred amounts earn annual interest equal to the
two-year Guaranteed Investment Contract Index on November 30 preceding each plan
year or 6%, whichever is higher (7.53% and 6% at November 30, 1994 and 1993,
respectively). The deferred amounts will be paid from the general assets of the
Company and are included in deferred compensation as of December 31, 1995 and
1994.
NOTE H - LEASE OBLIGATIONS
The Company leases office space and equipment at various locations
and accounts for these obligations as operating leases. Rentals relating to
theses leases are recorded on a straight-line basis. Rental expense
approximated $11,998,000, $8,916,000 and $7,956,000 in 1995, 1994, and 1993,
respectively. Contingent rentals may be due each year under the terms of the
various office space leases as the result of certain increases in building
operating expenses over the base year amounts. The following is a schedule, by
year, of future minimum rental payments required under operating leases with
remaining noncancelable lease terms in excess of one year as of December 31,
1995:
Year Ending December 31,
(Dollars in Thousands) Amount
---------------------- ------------------------
1996 $11,301
1997 9,896
1998 7,873
1999 5,371
2000 4,471
2001 and subsequent years 6,977
18
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - STOCKHOLDERS' EQUITY
Stock Split
Effective November 10, 1995, the Company's Common Stock split into
three shares for each two shares outstanding. All share and per share amounts
referred to in the financial statements and notes thereto have been
retroactively restated to reflect this split where appropriate.
Stock Option Plans
The Company has a 1986 Stock Option Plan under which 645,000 shares
of Common Stock are reserved for issuance upon the exercise of incentive stock
options, stock appreciation rights or nonqualified stock options that may be
granted to employees. Outstanding options granted under this plan are
exercisable, cumulatively in three or four equal annual installments beginning
one year from the date of grant. At December 31, 1995, 17,648 stock options
were available for grant under this plan.
The Company also has a 1993 Stock Incentive Plan, under which
1,050,000 shares of Common Stock are reserved for issuance upon the exercise
of incentive stock options or nonqualified stock options that may be granted
to employees. Outstanding options granted under this plan are exercisable,
cumulatively, in three equal annual installments, beginning one year from the
date of grant. At December 31, 1995, 382,461 stock options were available for
issuance under this plan.
In addition, in January 1995, the Company Shareholders adopted
amendments to the 1993 Stock Incentive Plan permitting awards of restricted
stock under such plan. The amendments to the 1993 Stock Incentive Plan permit
awards of up to an aggregate of 450,000 shares of the company's Common Stock
to certain officers and key employees. The value of the restricted stock award
is established by the market price on the date of the grant. Restrictions
generally limit the sale or transfer of the shares during a restricted period
of approximately three years. Thereafter, the restricted stock will either
vest, in whole or in part, with the participant or be forfeited, in whole or
in part, back to the Company based on its earnings performance for this three
year period. During 1995, 29,700 shares of restricted stock were awarded.
Approximately $230,000 related to these shares was charged to general sales,
consulting, and administration expenses in 1995.
The Company also has a Directors' Stock Options Plan, under which
150,000 shares of Common Stock are reserved for issuance upon the exercise of
stock options or nonqualified stock options that may be granted to
non-employee Directors of the Board of Directors. These options are
exercisable, cumulatively, in three equal annual installments, beginning one
year from the date of grant. At December 31, 1995, 138,000 stock options were
available for issuance under this plan.
19
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I - STOCKHOLDERS' EQUITY (Continued)
Stock options are summarized as follows (all options and option prices
have been retroactively restated for the stock split):
<TABLE>
<CAPTION>
Number of Exercise Price
Options per Option
--------- --------------
<S> <C> <C>
Outstanding at January 1, 1993 550,238 $ 1.50 - $ 9.92
Granted 159,938 $10.33
Exercised (83,190) $ 1.50 - $ 9.92
Canceled (26,397) $ 1.50 - $ 9.92
-------
Outstanding at December 31, 1993 600,589 $ 1.67 - $10.33
Granted 192,251 $12.09 - $16.25
Exercised (69,914) $ 1.67 - $ 9.92
Canceled (33,875) $ 1.67 - $10.33
-------
Outstanding at December 31, 1994 689,051 $ 2.75 - $16.25
Granted 260,000 $11.67 - $23.25
Exercised (72,612) $ 5.67 - $15.50
Canceled (26,750) $ 6.33 - $13.50
-------
Outstanding at December 31, 1995 849,689 $ 2.75 - $23.25
=======
</TABLE>
At December 31, 1995, 447,959 vested options were exercisable at
exercise prices ranging from $2.75 to $16.25 per option.
20
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - GEOGRAPHIC SEGMENTS
Summarized operations of each of the Company's segments in the
aggregate for each of the three years in the period ended December 31, 1995,
are as follows (See Note A for discussion relating to currency translation and
Note E for discussion relating to income taxes):
<TABLE>
<CAPTION>
(Dollars in Thousands)
1995 United States Canada Europe Consolidated
---- ------------- -------- ------ ------------
<S> <C> <C> <C> <C>
Identifiable assets $51,530 $2,181 $6,520 $ 60,231
Revenue 97,940 7,078 8,987 114,005
Operating income (loss) 11,874 1,987 (517) 13,344
Depreciation and amortization 3,788 173 323 4,284
Capital expenditures 2,393 96 154 2,643
1994
----
Identifiable assets $44,217 $2,141 $2,611 $48,969
Revenue 78,753 4,662 5,719 89,134
Operating income (loss) 8,900 1,456 (520) 9,836
Depreciation and amortization 2,897 143 206 3,246
Capital expenditures 2,510 263 148 2,921
1993
----
Identifiable assets $31,584 $1,356 $2,794 $35,734
Revenue 59,295 5,602 5,829 70,726
Operating income (loss) 5,641 1,373 (394) 6,620
Depreciation and amortization 2,090 102 215 2,407
Capital expenditures 1,326 65 260 1,651
</TABLE>
NOTE K - SUBSEQUENT EVENT
In January 1996, the Company signed a letter of intent to acquire the
outstanding stock of People Tech Consulting, Inc. ("People Tech") for a
combination of cash and future defined incentive payments. People Tech,
headquartered in Toronto, Canada, is an organizational consulting firm
specializing in change management, communication, strategy and emerging
information technologies. The Company anticipates it will complete the
acquisition in early April 1996. Management estimates that the purchase price
will approximate $3.3 million and will be funded through a combination of cash
and long-term debt.
21
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth results of operations before income
taxes for the years indicated. This discussion and analysis is to be read in
conjunction with the financial statements and accompanying notes thereto.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Year Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Company Office revenue............................. $109,741 $84,712 $66,868
Company Office expenses............................ 86,878 67,419 53,177
-------- ------- -------
Company Office margin.............................. 22,863 17,293 13,691
Affiliate royalties ............................... 4,264 4,422 3,858
General sales, consulting and administration....... (13,783) (11,879) (10,929)
Other expense, net................................. (429) (47) (173)
-------- ------- -------
Income before income taxes......................... $ 12,915 $ 9,789 $ 6,447
======== ======= =======
</TABLE>
1995 Compared to 1994
Revenue generated by Company Offices increased 30%, or $25,029,000,
in 1995 compared to 1994. This increase was due to revenue growth in existing
Company Offices and the acquisitions made since June 1994 which included the
Carolina region, JBA, Cupertino, LM&P and Providence. Revenue generated
through these acquisitions totaled $14,590,000 or approximately 58% of the
total revenue increase. On a same office basis, Company Office revenue was
$94,056,000 in 1995, or an 11% increase over 1994.
Affiliate royalties decreased 4%, or $158,000, in 1995 compared to
1994 due primarily to the acquisition by the Company of two Affiliates in 1995
and another in June 1994, whereby revenue is reflected as Company Office
revenue subsequent to the acquisitions. On a same office basis, Affiliate
royalties increased 11% in 1995 over 1994. This resulted primarily from
increased market penetration particularly in the North Central and Great Lakes
regions in the United States.
Company Office expenses in the aggregate increased 29%, or
$19,459,000, in 1995 compared to 1994, reflecting a combination of growth in
existing Company offices, the 1995 acquisitions and the acquisition of JBA in
September 1994. The 1995 acquisitions accounted for $5,535,000 or 28% of the
total cost increase. The remaining increases were due to certain duplicate
facilities and administration from the acquisition of JBA as well as general
expense increases from existing Company Offices related to the revenue growth
during 1995. The Company is seeking to continue to improve Company Office
margins through the achievement of further economies of scale as the recent
acquisitions continue to be integrated. The Company's aggregate Company Office
operating margin improved moderately to approximately 21% in 1995 from 20% in
1994.
22
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
General sales, consulting and administration expense reflected an
increase of approximately $1,904,000, or 16%, in 1995 compared to 1994. This
increase was primarily due to investments made in the development of the
Company's consulting services, increases in amortization relating to recent
acquisitions and additional charges for duplicate Company Office closures
primarily related to the redundant Company Offices from the JBA acquisition.
Despite these increases, the total expenses in this category as a percentage
of revenue plus Affiliate royalties decreased to 12% in 1995 from 13% in 1994.
In 1995, income before income taxes increased 32% to $12,915,000 from
$9,789,000 in 1994. This increase resulted principally from the combination of
greater Company Office revenue and improved efficiencies in general sales,
consulting and administration.
The Company's effective tax rate was approximately 40% in 1995
compared to 42% in 1994. This reduction resulted from a combination of factors
including a decrease in foreign income taxes payable by the Company and an
increase in the utilization and benefit of foreign operating loss
carryforwards (See Note E of the Notes to the Consolidated Financial
Statements).
1994 Compared to 1993
Revenue generated by Company Offices increased 27%, or $17,844,000,
in 1994 compared to 1993. This increase was primarily due to revenue growth in
existing Company Offices and the acquisitions made in 1994. Revenue generated
through acquisitions, including JBA, totaled $6,517,000 or approximately 37%
of the total revenue increase. On a same office basis, Company Office revenue
was $77,465,000 in 1994, or a 16% increase over 1993.
Affiliate royalties increased 15%, or $564,000, in 1994 compared to
1993 despite acquisitions of former Affiliate offices over the past two years,
whereby revenue is reflected as Company Office revenue subsequent to the
acquisitions. This resulted primarily from increased market penetration
particularly in the aggregate Western and Central United States regions.
Company Office expenses in the aggregate increased 27%, or
$14,242,000, in 1994 compared to 1993, reflecting a combination of the revenue
increases in existing Company Offices and the 1994 acquisitions. While the
1994 margin for existing Company Offices improved from the prior year, the
improvement was partly offset by the increased expenses from the 1994
acquisitions, including JBA. The 1994 acquisitions accounted for $6,042,000 or
42% of the total cost increase. The Company's aggregate Company Office
operating margin remained unchanged at approximately 20% in 1994 as in 1993.
23
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
General sales, consulting and administration expense reflected an
increase of approximately $950,000, or 9%, in 1994 compared to 1993. This
increase was primarily due to increased amortization costs from acquisitions,
certain technology and planning expenditures and increased incentive
compensation associated with the Company's improved operating results. Despite
these increases, the total expenses in this category as a percentage of
revenue plus Affiliate royalties has decreased to 13% in 1994 from 15% in
1993.
In 1994, income before income taxes increased 52% to $9,789,000 from
$6,447,000 in 1993. This increase resulted principally from greater Company
Office revenue, improved operating margins in existing Company Offices and an
increase in affiliate royalties.
The Company's effective tax rate was approximately 42% in 1994
compared to 49% in 1993. This decrease was a result of the Company's reduction
in the effect of nondeductible expenses on the effective tax rate and foreign
taxes.
Capital Resources and Liquidity
The Company has financed its growth primarily through a combination
of cash flow provided by operations and borrowings under its Revolving Credit
Agreement (See Note D of the Notes to the Consolidated Financial Statements).
Increases in existing Company Office revenue, increased frequency in accounts
receivable collection and generally more effective cost structures have
allowed the Company to achieve its growth in cash flow from operations. The
Company's working capital increased to $13,134,000 from $9,883,000 at December
31, 1995 and 1994, respectively. At December 31, 1995 and 1994, the Company
had cash and cash equivalents of $8,965,000 and $9,156,000, respectively.
Net cash provided by operating activities amounted to $7,335,000 and
$6,515,000 for 1995 and 1994, respectively. These amounts are primarily
generated from net income as well as non-cash charges such as depreciation and
amortization, offset by increases in accounts receivable and accounts payable,
each a reflection of continued Company growth.
Net cash utilized by investing activities amounted to $5,308,000 and
$4,549,000 for 1995 and 1994, respectively. The Company has strategically
invested in purchases of equipment and technology to meet the needs of its
expanding operations and to enhance its operating efficiency and
effectiveness. In addition, in 1995 and 1994 the Company acquired the assets
and/or outstanding stock of seven career management consulting firms for a
combination of cash and non-cash items, including assumption of incomplete
consulting contracts, future defined incentives and other considerations. The
present values of these future defined incentives, which are only applicable
to certain acquisitions and which are estimated to amount to an aggregate of
$3,646,000 as of December 31, 1995, are contingent upon operating results of
the region in which the successor Company Office now operates. These
incentives generally relate to the three years subsequent to the respective
acquisitions. The Company anticipates that ongoing cash flow and working
capital will be sufficient to fund these incentive payments as they become
due.
24
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net cash utilized by financing activities amounted to $2,250,000 and
$1,493,000 in 1995 and 1994, respectively. These amounts represent payments of
the Company's borrowings and defined incentives for acquisitions made in
previous years, as discussed above, which were in excess of proceeds from
stock issuances.
In addition to cash flow provided by operations, the Company has
borrowing facilities to provide for increased working capital needs as well as
to make funds available for future acquisition opportunities. During 1995, the
Company increased its borrowing capacity to $10,000,000 from the previous
$6,000,000 level through its Revolving Credit Agreement with its primary bank.
During 1995, the Company completed the acquisitions of its former Cupertino
Affiliate and LM&P, utilizing approximately $1.3 million from its revolving
credit facility, all of which was outstanding at December 31, 1995. The Company
had approximately $8,103,000 was available under the Revolving Credit Agreement
at December 31, 1995. Furthermore, in connection with the JBA acquisition in
1994, the Company entered into a separate five year $5,000,000 unsecured term
loan at a fixed annual interest rate. Subsequent to December 31, 1995, the
Company signed a letter of intent to acquire the outstanding stock of People
Tech for a combination of cash and future defined incentive payments. The
Company anticipates it will complete the acquisition in early April 1996.
Management estimates that the purchase price will approximate $3.3 million and
will be funded through a combination of cash and long-term debt.
The Company anticipates that its cash and working capital will be
sufficient to service its existing debt and maintain Company operations at
current levels for the foreseeable future. The Company will continue to
consider expansion opportunities as they arise, although the economics,
strategic implications and other circumstances justifying the expansion will
be key factors in determining the amount and type of resources the Company
will devote to further expansion.
25
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
STATEMENT OF MANAGEMENT'S FINANCIAL RESPONSIBILITY
Management has prepared and is responsible for the integrity and
objectivity of the financial statements and related financial information
contained in this Annual Report. The financial statements are in conformity
with generally accepted accounting principles consistently applied and reflect
management's informed judgment and estimation as to the effect of events and
transactions that are accounted for or disclosed.
Management maintains a system of internal control. This system, which
undergoes periodic evaluation, is designed to provide reasonable assurance
that assets are safeguarded and records are adequate for the preparation of
reliable financial data. In determining the extent of the system of internal
control, management recognizes that the cost should not exceed the benefits
derived. The evaluation of these factors requires estimates and judgment by
management.
Arthur Andersen LLP, is engaged to render an opinion as to whether
management's financial statements present fairly Right Management Consultants,
Inc.'s financial position, results of operations and cash flows. The scope of
their engagement included a review of the internal control system to the
extent deemed necessary to render an opinion on these financial statements.
The Report of Independent Public Accountants is presented in the enclosed
document.
The Audit Committee of the Board of Directors meet directly with the
Independent Public Accountants and management to ascertain whether they are
properly discharging their responsibilities.
Right Management Consultants, Inc.
/s/ G. Lee Bohs
------------------------------------------------
G. Lee Bohs
Executive Vice President,
Chief Financial Officer, Treasurer and Secretary
26
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
Directors and Frank P. Louchheim Founding Chairman and Director
Executive Officers Richard J. Pinola Chairman of the Board,
Chief Executive Officer and Director
Joseph T. Smith President, Chief Operating Officer
and Director
Larry A. Evans Executive Vice President and
Director
Nancy N. Geffner Group EVP - Greater New York
Region and Director
Joseph E. Jannotta, Jr. Executive Vice President and
Director
Directors John R. Bourbeau President of Right Associates
of the Great Lakes Region, an
Affiliate of the Company
Raymond B. Langton President and Chief Executive
Officer of SKF North America
Rebecca J. Maddox President and Co-founder of Capital
Rose, Inc.
Catherine Y. Selleck Business Consultant
Other Executive Officers G. Lee Bohs Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
Manville D. Smith Executive Vice President of Business
Development
Victor V. Coppola Group EVP - Mid- Atlantic U.S. Region
Peter J. Doris Group EVP - Southeast U.S. Region
David S. Orr Group EVP - North Central U.S. Region
Warren R. Radtke Group EVP - Northeast U.S. Region
Gary L. Saenger Group EVP - Southwest U.S. Region
Terry W. Szwec Group EVP - Canadian Region
George L. Whitwell Group EVP - Northwest and South Central
U.S. Region
Corporate Headquarters Right Management Consultants, Inc.
1818 Market Street
Thirty Third Floor
Philadelphia, Pennsylvania 19103
General Counsel Fox, Rothschild, O'Brien & Frankel
Philadelphia, Pennsylvania
</TABLE>
27
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
<TABLE>
<CAPTION>
<S> <C>
Subsidiaries Right Associates Government Services, Inc.
Right Associates Acquisition Co.
Conviction Right France, SA
Right Associates (Belgium), Inc.
Right Associates (France), Inc.
Right Associates & Co., SNC
Right Human Resources, Inc.
Right Associates, Ltd.
Right Associates, Inc.
Right Associates License, Inc.
R.M.C. & Co., SNC
The THinc Consulting Group International (U.K.), Ltd.
Service Marks and Right Associates, THinc, Partners in Managing Change
Trade Marks The Right Fit, and ZIP (Zeroing-in-process) are
registered Service Marks of Right Management
Consultants, Inc.
The Right Report and The Right JobBank are
registered Trademarks of
Right Management Consultants, Inc.
The Right Way is a Service Mark of
Right Management Consultants, Inc.
</TABLE>
28
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
Common Stock Data Right Management Consultants, Inc.
Common Stock Listed on NASDAQ Stock Market
Symbol RMCI
1995 High Low
---- ---- ---
First Quarter 14 10 1/3
Second Quarter 15 1/3 11 1/6
Third Quarter 22 2/3 15
Fourth Quarter 29 1/4 20
1994 High Low
---- ---- ---
First Quarter 15 1/2 10
Second Quarter 13 1/6 9 5/6
Third Quarter 16 2/3 11 1/3
Fourth Quarter 16 1/3 11 1/2
The above prices reflect interdealer prices, without retail markup,
markdown or commission and may not necessarily represent actual transactions.
As of March 20, 1996, there were 164 record holders of the Company's
Common Stock.
The Company has never paid any dividends on its Common Stock and
currently expects that all of its earnings will be retained and reinvested in
the Company's business.
29
<PAGE>
THE WORLD OF RIGHT ASSOCIATES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WORLD lllinois New York Washington
HEADQUARTERS Chicago Buffalo Seattle
Edwardsville Melville
Philadelphia, PA Northbrook New York Wisconsin
Oak Brook Westchester Madison
NORTH AMERICA Oakbrook Terrace Milwaukee
North Carolina
US OFFICES Indiana Charlotte CANADA
Indianapolis Greensboro Alberta
Arizona Raleigh Calgary
Phoenix Iowa Edmonton
Tucson Des Moines Ohio
Cincinnati British Columbia
California Kansas Cleveland Vancouver
Cupertino Wichita Columbus
Glendale Dayton Manitoba
Irvine Kentucky Toledo Winnipeg
Los Angeles Fort Mitchell
Pasadena Lexington Oklahoma Ontario
Sacramento Louisville Oklahoma City Kingston
San Bernardino Tulsa London
San Diego Louisiana Mississauga
San Francisco New Orleans Pennsylvania Ottawa
Torrance Allentown Richmond Hill
Walnut Creek Maryland Lancaster Toronto
Woodland Hills Baltimore Malvern
Hunt Valley Philadelphia Quebec
Colorado Pittsburgh Montreal
Colorado Springs Massachusetts
Denver Boston Rhode Island Saskatchewan
Burlington Providence Regina
Connecticut Springfield Saskatoon
Hartford South Carolina
Stamford Michigan Charleston
Detroit Greenville INTERNATIONAL
Delaware Grand Rapids Aberdeen
Wilmington Kalamazoo Tennessee Antwerpen
Lansing Kingsport Brussels
District of Columbia Midland Knoxville Geneva
Washington Memphis Glasgow
Minnesota Nashville Leeds
Florida Minneapolis London
Boca Raton Texas Manchester
Fort Lauderdale Mississippi Austin Newcastle
Jacksonville Jackson Dallas Paris
Miami Fort Worth San Juan
Orlando Missouri Houston Swindon
Palm Beach Kansas City San Antonio
Saint Petersburg Saint Louis
Tampa Virginia
Nebraska Fairfax
Georgia Omaha Richmond
Atlanta Vienna
New Jersey Virginia Beach
Montvale
Parsippany
Princeton
</TABLE>
30
<PAGE>
SUBSIDIARIES OF THE COMPANY
1. Right Associates Government Services, Inc., a Virginia corporation
2. Right Associates Acquisition Co., a Delaware corporation
3. Conviction Right France, SA, a French corporation
4. Right Associates (Belgium), Inc., a Delaware corporation
5. Right Associates (France), Inc., a Delaware corporation
6. Right Associates & Co., SNC, a Belgium corporation
7. Right Human Resources, Inc., a Canadian corporation
8. Right Associates, Ltd., a U.K. corporation
9. Right Associates, Inc., a Delaware corporation
10. Right Associates License, Inc., a Delaware corporation
11. R.M.C. & Co., SNC, a Belgium corporation
12. The THinc Consulting Group International (U.K.), Ltd.,
a U.K. corporation
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in this Form 10-K in the
Company's previously filed Registration Statement File Nos. 33-58698, 33-62997,
and 33-62999.
Arthur Andersen LLP
Philadelphia, Pennsylvania
March 29, 1996
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,965
<SECURITIES> 0
<RECEIVABLES> 21,975
<ALLOWANCES> 754
<INVENTORY> 0
<CURRENT-ASSETS> 32,379
<PP&E> 16,965
<DEPRECIATION> 6,657
<TOTAL-ASSETS> 60,231
<CURRENT-LIABILITIES> 19,245
<BONDS> 0
43
0
<COMMON> 0
<OTHER-SE> 34,100
<TOTAL-LIABILITY-AND-EQUITY> 60,231
<SALES> 114,005
<TOTAL-REVENUES> 114,005
<CGS> 39,957
<TOTAL-COSTS> 86,878
<OTHER-EXPENSES> 13,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 429
<INCOME-PRETAX> 12,915
<INCOME-TAX> 5,096
<INCOME-CONTINUING> 7,819
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,819
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.83
</TABLE>
