UNITED STATES 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, 1997
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.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
(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:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant using the closing stock price as of February 20,1998 was $78,877,809.
The number of shares outstanding of the registrant's Common Stock as of February
20, 1998 was 6,713,005.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I & II Portions of the Company's 1997 Annual Report to Shareholders
for the fiscal year ended December 31, 1997.
Part III The Company's definitive proxy statement with respect to its 1998
Annual Meeting of Shareholders to be held on May 7, 1998.
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PART I
Item 1: Business
General
Right Management Consultants, Inc. (the "Company") is an international career
management and human resource consulting firm headquartered in Philadelphia,
Pennsylvania. Founded in 1980, the Company has been publicly owned since 1986.
The Company is the largest firm in the career management industry with revenues
in excess of $125 million. Worldwide operations are structured into eight
geographic groups that provide management oversight to approximately 140
locations worldwide, including both Company owned and Affiliate offices.
The Company licenses its Affiliates to use its service marks 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. The Company's fees for its 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 or employment agency.
The Company's operations are separated into two lines of business: Right
Associates(R), specializing in career transition services, and People Tech
Consulting ("People Tech"), specializing in career development and human
resource consulting.
Right Associates(R)
Right Associates(R) currently provides career transition services to
approximately 4,900 client companies, including the majority of the Fortune
500. In the two year period ended December 31, 1997, approximately 500,000
individuals were assisted by Right Associates'(R) consultants during their
career transition. Right Associates'(R) services are separated into two
principal categories - Individual Outplacement Services and Group Outplacement
Services.
Individual Outplacement Services
The Company's individual outplacement services for the employer include advice
on conducting the termination interview, terms of severance pay and other
termination benefits. 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 consulting and motivation throughout the
job search campaign; assessing new employment offers and methods of accepting
such offers (including consideration of relocation issues) and, where
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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.
Approximately 83% of the career transition revenue generated by Company offices
during 1997 was for individual outplacement services.
Group Outplacement Services
The remaining significant portion of the Company's career transition business
consists of providing 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 counseling.
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.
Approximately 17% of the career transition revenue generated by Company offices
during 1997 was for group outplacement services.
Other
The Company is also providing a combination of individual and group career
transition 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, consulting 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 30 Job
Assistance Centers in the United States and abroad, which are staffed by
employees of a government subsidiary of the Company created for this contract,
and RCI, a Vienna, Virginia based consulting firm.
During 1997, the Company executed a renewal of the contract with RCI extending
through May 1998. The Company's anticipated share of the cost plus fixed fee
contract revenue will approximate $4,500,000 over the eighteen month period
through May 1998. The contract contains annual renewal options for RCI and the
United States Army to extend beyond May 1998. The Company is optimistic that an
extension will be granted although no assurances can be given that there will be
an extension of this contract. Revenues from the contract are included in both
the individual outplacement and group outplacement services described above.
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The career transition business in total, including individual outplacement
services, group outplacement services and the contract with RCI, provided
approximately 91% of total Company office revenue for the year ended December
31, 1997.
Career Management and Organizational Consulting
During 1996, the Company acquired the outstanding stock of People Tech
Consulting, Inc., a Canadian corporation (see Note C to the Consolidated
Financial Statements). With the addition of People Tech's organizational
consulting business to the Company's previously established career management
consulting practice, the Company is strongly committed to developing and
broadening this line of business.
The Company provides career management consulting services which assist
employers and their employees in identifying and improving areas of job
performance, refining communication skills and improving employee productivity.
The Company also provides human resource consulting to corporations on
restructuring and realignment issues, offering 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 consulting business in total, including career management consulting and
organizational consulting, provided approximately 9% of total Company office
revenue for the year ended December 31, 1997.
Subsequent to December 31, 1997, the Company completed the acquisition of two
consulting firms with diverse capabilities, which will further strengthen its
career management and organizational consulting practice. The transactions
include Manus, a Stamford, Connecticut firm and The Atlanta Consulting Group, of
Atlanta, Georgia.
Manus has been a provider of human resource consulting services since 1984. Its
areas of specialty include 360-degree feedback systems, the development of
competency models, leadership development, and strategic management, as well as
other aspects of corporate training and development and organizational change.
The 360-degree feedback system is a product which allows management employees to
find out how their supervisors, their colleagues, their direct reports, their
fellow team members, their internal and external customers, and their suppliers
perceive their behavior. The Manus principals will lead the human resource
consulting practice for the Company's Metro New York Group.
The Atlanta Consulting Group ("TACG") represents over 25 years of organizational
consulting experience. The firm offers a full range of training and development
methodologies and materials, and has provided strategic workforce management
solutions for corporate clients. Under an exclusive licensing agreement, the
Company intends to sell and deliver TACG's full
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range of products and methodologies and has hired all TACG former employees, who
will now assume key roles in the development and expansion of the consulting
business in the Company's Southern Group.
In addition, subsequent to December 31, 1997, the Company executed a letter of
intent with Teams, Inc., Tempe, Arizona, pursuant to a transaction expected to
be completed in April 1998. Teams, Inc. is a technology-based assessment firm,
specializing in 360-degree feedback instruments to support a wide spectrum of
organizational change initiatives, such as career management, leadership
training and development, team-building and performance and pay management. The
transaction will be structured as a joint venture, with the Company purchasing a
51% interest. As a part of the purchase agreement, the minority shareholders of
Teams have agreed to provide the Company with options to acquire the remaining
49% of the outstanding shares of Teams beginning on April 1, 2001. Additionally,
the minority shareholders of Teams have the right to require the Company to
purchase the remaining 49% of the outstanding shares of Teams beginning on April
1, 2001. No assurances can be given that the transaction with Teams will be
completed.
See Note M to the Consolidated Financial Statements for more details on these
transactions.
Fees for Services Provided by Company Offices
For individual career transition 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 career transition programs and
consulting projects are individually billed depending upon the type of services
the employer requests, the amount of consulting time required and the number of
employees involved.
Organization and Distribution of Company Offices and Affiliates
The current network of Company offices and Affiliates is outlined in the
Company's 1997 Annual Report to Shareholders, attached as Exhibit 13 hereto,
that portion of which is incorporated herein by reference.
Management of Company Offices and Affiliates
The Company believes that a decentralized approach of organizing its business
into geographic groups and related regions, which may be comprised of more than
one Company office or Affiliate office, allows the Company to be responsive to
individual clients, as well as allowing it to better serve its local and
regional markets. Each region is responsible for the marketing and sales of
career transition and consulting activities in its assigned area. 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."
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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 transition and 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 marks,
including "Right Associates(R)". Under the Affiliate Agreements, the Company
assists the Affiliates in various ways in the provision of career transition and
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
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 transition or consulting services within Exclusive
Territories which the Company currently or in the future grants or assigns to
Company offices.
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.
Company Training of Affiliates
The Affiliate Agreements require the Company to train the Affiliate and its
employees in marketing and delivery of career transition and consulting
services. The Company is responsible for overall guidance and has established
Company standards and policies relating to its 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 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 Affiliates'
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.
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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 career
transition 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. The 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.
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.
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
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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.
Acquisitions
During 1997, the Company completed eleven separate acquisitions consisting of
ten career transition firms and one search firm. See Note C to the Consolidated
Financial Statements for a detailed description of the acquisitions. The total
purchase price for these acquisitions aggregated approximately $15,556,000,
including costs of acquisition. The acquisitions were consummated through
combinations of cash and non-cash considerations, including the assumption of
incomplete consulting contracts.
During the period 1991 through 1996, the Company completed fifteen separate
acquisitions of career transition and consulting firms for combinations of cash,
future defined incentives, incomplete career transition contracts and other
considerations. The total purchase price for these transactions aggregated
approximately $24,104,000, including costs of acquisition.
During the period 1991 through 1997, the total number of acquisitions completed
by the Company included ten former Affiliates. At December 31,1997, there were
five domestic Affiliate regions remaining in the Company's network of offices.
Government Regulation
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. 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
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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 upon expiration. 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. As part of the Company's operating strategy, new Affiliates are
not being sought and the Company will likely acquire the remaining Affiliate
territories as they become available.
Financial Information Relating to Foreign Operations
See the Company's Consolidated Financial Statements, Note L, "Segments"
contained in the Company's 1997 Annual Report to Shareholders, the incorporated
portions of which are included as Exhibit 13 to this report, 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 28, 1998, the Company and its subsidiaries employed 880 persons
full-time, including 14 in senior management, 92 in other managerial and
professional roles, 342 in field operations as consultants, and 432 in clerical
capacities. In addition, the Company employed 376 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. In
general, the Company believes that its employee relations are good.
Risk Factors
In addition to the other matters discussed elsewhere in this Report, the
following risk factors should be taken into account in evaluating the Company
and its business:
1. Government Regulation: In connection with its arrangement with its
Affiliates, the Company devotes resources to complying with state and
federal laws governing franchising. The Company believes that its practices
and procedures are not in violation of the material provisions of such
state and federal laws and it has not received notices of material claims
or assertions from Affiliates regarding non-compliance. Nevertheless, the
Company's past practices may give rise to possible liability, and given the
scope of the Company's business and the nature of franchise regulation,
compliance problems could be encountered in the future. For a discussion of
the Company's past and current compliance with state and federal
franchising laws, other regulatory aspects of the Company's relations with
its Affiliates and possible
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liability of the Company for certain of its past activities, see "Business
- Government Regulation."
Although career transition and human resource consulting services are not
currently specifically subject to state or federal regulation, the Company
is aware that such regulation has been considered by the legislatures of
several states. There can be no assurance that such regulation will not be
adopted in the future.
2. Relations with Affiliates: The Company's revenue depends in part on
royalties and fees paid by Affiliates. Under the current Affiliate
Agreements, the royalty is equal to 10% of the Affiliate's total gross
receipts. The fees paid by Affiliates to the Company vary depending on the
services provided by the Company. The Company believes that the 10% royalty
is reasonable and currently has no plans to reduce it, although there can
be no assurance that such royalty will continue to be maintained at such
level under all circumstances. The Company believes that its relations with
the Affiliates are good, however, there can be no assurance that such
relations will remain so. A deterioration of these relationships among the
Company and its Affiliates, or among the Affiliates themselves, or an
inability to collect royalties and fees payable to the Company or payable
by one Affiliate to another could materially adversely effect the Company.
See "Business - Affiliate Arrangements."
3. Possible Effects of Change in Company Control and Possible Future Issuance
of Preferred Stock: Under certain circumstances and pursuant to its
Affiliate Agreements, upon certain contemplated sales of 51% or more of the
Company's outstanding Common Stock, or a Company merger, consolidation or
reorganization, the Affiliates may have a right of first refusal to acquire
the Common Stock of the Company being sold or exchanged, on the same terms
as the proposed transaction with a third party. In addition, under the
Affiliate Agreements and under certain circumstances, upon sales of 51% or
more of the Company's assets or capital stock in one or more transactions,
or a Company merger, consolidation or reorganization, then, regardless of
the time remaining on the term of such Affiliate's current Affiliate
Agreement, the term of such Affiliate Agreement is automatically altered to
either (i) one year, with the Affiliate also having an option to renew the
Affiliate Agreement for an additional four year period upon the expiration
of such one year term, or (ii) five years, extending from the date of such
transaction, merger, consolidation or reorganization.
Also, in the event of such transaction or reorganization, under the
Company's Employment Agreements with its executive officers, such officers
have an option to extend the term of their respective Employment Agreements
for an additional two years.
The Company's Articles of Incorporation authorize the issuance of up to
1,000,000 shares of Preferred Stock, at the discretion of the Board of
Directors. The Board of Directors may also fix from time to time in the
future, the designations, limitations, and preferences for any such series
of Preferred Stock issuance, without any further vote or action by
shareholders.
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The Affiliates' right of first refusal and the alteration of the term of
their Affiliate Agreements, or the executive officers' right to extend the
term of their Employment Agreements, or the issuance of Preferred Stock at
the discretion of the Board of Directors may make the Company less
attractive to an entity or group considering acquiring control of the
Company or may make an acquisition materially more difficult, resulting in
lower acquisition price per share, or may otherwise materially adversely
affect an investment in the Company's Common Stock.
4. Competition: The Company competes against other providers of career
transition services and other human resource consulting services. Based on
consolidated revenues for 1997, the Company has maintained its status as
the world's largest provider of career management services worldwide.
However, the Company's primary national and international competitors are
divisions of companies much larger than the Company, and these competitors
may have access to financial and other resources substantially greater than
those available to the Company.
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 also competes against local career transition
and other human resource consulting firms that are well-established in a
particular region. The Company believes that the cost for its services are
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 and other human resource consulting businesses.
5. Dependence on Personnel: As with other service businesses, the Company
depends upon the continued services of its executive, sales, and consulting
personnel. The loss of these personnel, or an inability to attract and
retain new qualified personnel or to retain qualified Affiliates, could
have an adverse impact on the Company.
6. Risks Related to the Company's Acquisition Strategy: The Company has grown
both internally and through acquisitions, and intends to continue to grow
by both of these methods. Historically, the Company has primarily acquired
outside firms within the highly fragmented career transition services
industry. See "Business - Acquisitions." In future periods, the Company
will continue to consider opportunistic acquisitions of career transition
providers. However, it is more likely that the Company will look to acquire
other consulting service providers, thereby allowing the Company to
diversify its range of services provided.
Increased competition for acquisition candidates may develop, in which case
there may be fewer acquisition opportunities available to the Company, as
well as higher acquisition prices. There can be no assurance that the
Company will be able to continue to identify, acquire, or profitably manage
additional businesses or successfully integrate acquired businesses, if
any, without substantial costs, delays or other operational or financial
problems. Further,
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acquisitions involve a number of special risks, including possible adverse
effects on the Company's operating results, diversion of management's
attention, failure to retain key acquired personnel, risks associated with
unanticipated events or liabilities and amortization of acquired tangible
and intangible assets, some or all of which could have a material adverse
effect on the Company's business, financial condition and results of
operations. In addition, there can be no assurances that the Company's
existing business, subsequent acquisitions or other businesses acquired in
the future will achieve anticipated revenues and earnings.
7. Economic Conditions on a Local, Regional, National, and International
Basis: The demand for the Company's services, primarily career transition
services, is impacted by the overall economic strength on a local,
regional, national and international basis. In general, a stronger economy
can lead to easier and more rapid job change and reentry, which can reduce
the demand for the Company's services or compress the length of the
services provided, thereby negatively impacting prices. Weaker economic
conditions can also lead to reluctance on outside companies' part to incur
the expenditure associated with the Company's services.
Item 2: Properties
The Company leases approximately 23,000 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 684,000 square feet for all Company offices, including the
corporate headquarters, at an aggregate yearly rental cost of approximately
$14,350,000. Most of these leases are also subject to annual operating expense
escalation clauses. The Company believes its facilities are adequate to provide
services to its clients.
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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Executive Officers of the Registrant
Each of the following executive officers of the Company has been appointed by
the Board of Directors and served during 1997 in the following roles. All of the
executive officers are expected to devote their full business time to the
Company's affairs.
Name Age Position(s)
Richard J. Pinola 52 Chairman of the Board of Directors and Chief
Executive Officer
Frank P. Louchheim 74 Founding Chairman and Director
Joseph T. Smith 62 President, Chief Operating Officer and
Director
John J. Gavin 41 Executive Vice President
G. Lee Bohs 38 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
Larry A. Evans 55 Executive Vice President and Director
Dr. Marti D. Smye 47 President of People Tech and Director
Frederick R. Davidson 61 President of Davidson & Associates, Pty.
Ltd. and Director
Peter J. Doris 51 Executive Vice President
Nancy N. Geffner 58 EVP - New York Group
Manville D. Smith 58 EVP - Southern Group
Terry W. Szwec 47 EVP - Canadian Group
Gilbert A. Wetzel 65 EVP - Eastern Group
Joan Strewler 47 EVP - North Central Group
Timothy D. Dorman 50 EVP - Western Group
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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. He 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 of two outside companies: Epitaxx and 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.
Mr. Joseph Smith joined the Penn Mutual Life Insurance Company in 1963. In 1976,
he was promoted to Vice President of Administration and Human Resources, which
position he held until his resignation in 1980. 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.
Mr. Gavin was employed at Arthur Andersen LLP in Philadelphia for 18 years in
which he served as the partner in charge of the manufacturing/distribution
industries. Mr. Gavin joined the Company in December 1996 as Executive Vice
President. In this capacity, Mr. Gavin is responsible for the overall marketing
strategy and business development activities for the Company's worldwide
locations. Mr. Gavin serves as the Chairman of Temple University's Accounting
Advisory Board and is a member of the Board of Trustees of the Eagle's Fly for
Leukemia Foundation.
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. Bohs also
serves as a director of Alliance National Inc., a public company which provides
short term office space and comprehensive business support services.
13
<PAGE>
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. From January
1990 until May 1995, Mr. Evans served as Regional Managing Principal of several
Company offices. 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 1981 to 1989, Dr. Smye was a partner of the industrial psychology firm,
Jackson Smith. From this company, in 1989 she founded the change leadership
consulting firm, People Tech Consulting, Inc. ("People Tech"). People Tech was
acquired by the Company in April 1996. In addition, she is the author of two
books titled You Don't Change a Company by Memo: The Simple Truths About
Managing Change and Corporate Abuse: How "Lean and Mean" Robs People and
Profits. Dr. Smye also serves on various boards of both private companies and
community associations, including the Public Policy Forum and the Harvard
Business School Club of Toronto.
Mr. Davidson is the President of Davidson and Associates, Pty. Ltd., an
Asia-Pacific career transition firm of which the Company acquired a fifty-one
percent interest during 1997 (see Note C to the Consolidated Financial
Statements). Mr. Davidson was elected a Director by the Board of Directors on
July 24, 1997. Mr. Davidson has published numerous articles on career planning,
termination practices and managing large scale staff reductions, and he is the
author of The Art of Executive Firing and Handbook of Executive Survival. Mr.
Davidson is the founding president of the Australian Association of Outplacement
Consulting Firms.
Prior to joining the Company in 1986, 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 Executive Vice President for the Southern region
of the United States in which capacity he served during 1996. During 1997, Mr.
Doris worked 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 December
1983, Ms. Geffner 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 Executive Vice President for the
New York Group, in which capacity she served during 1997.
14
<PAGE>
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
and Mr. Smith served in this capacity until 1996. Effective January 1997, Mr.
Smith became the Group Executive Vice President for the Southern region of the
United States in which capacity he currently serves.
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 Havilland 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 Executive Vice President for the Canadian
operations of the Company in which capacity he currently serves.
Prior to joining the Company in 1994, Mr. Wetzel was associated with the Bell
System serving as Chairman and Chief Executive Officer of Bell of Pennsylvania
and Diamond State Telephone. Effective December 1996, Mr. Wetzel became the
Group Executive Vice President for the Eastern region of the United States in
which capacity he currently serves. Mr. Wetzel serves as a director of Ace*Comm
Corporation, a public company which develops, markets and services operations
support systems products for networks deployed by telecommunications service
providers using intranets and the Internet.
Prior to the Company's acquisition of Career Dynamics, Inc. ("CDI") (see Note C
to the Consolidated Financial Statements), Ms. Strewler was the President of
CDI, an innovative leader in career transition services and organizational
consulting. Effective August 1, 1997, Ms. Strewler became the Group Executive
Vice President for the North Central region of the United States in which
capacity she currently serves. Ms. Strewler also serves on various boards of
both private and not-for-profit companies, as well as industry trade
associations, including the Association of Outplacement Consulting Firms - North
America (AOCFNA) and the International Board of Career Management Certification.
15
<PAGE>
Prior to the Company's acquisition of Nelson, O'Connor & Cox ("Nelson") (see
Note C to the Consolidated Financial Statements), Mr. Dorman was the Vice
President and Managing Director of the Pacific Coast office of Nelson, an
executive search firm. Prior to joining Nelson, Mr. Dorman held various
executive positions in the career management industry. In July 1997, Mr. Dorman
became the Group Executive Vice President for the West region of the United
States in which capacity he currently serves.
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
The information required by this Item is incorporated by reference to the
section titled "Common Stock Data" in the Company's 1997 Annual Report to
Shareholders, the incorporated portions of which are included as Exhibit 13 to
this Report.
Item 6: Selected Financial Data
The information required by this Item is incorporated by reference to the
section titled "Selected Financial Data" in the Company's 1997 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
The information required by this Item is incorporated by reference to the
section titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's 1997 Annual Report to Shareholders, the
incorporated portions of which are included as Exhibit 13 to this Report.
Item 8: Financial Statements and Supplementary Data
The information required by this Item is incorporated by reference to the
sections titled "Consolidated Balance Sheets", "Consolidated Statements of
Income", "Consolidated Statements of Shareholders' Equity", "Consolidated
Statements of Cash Flows" and "Notes to Consolidated Financial Statements" in
the Company's 1997 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.
16
<PAGE>
PART III
The information called for by Items 10 through 13 of Form 10-K (except for the
information set forth on pages 12-16 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 Public Accountants" contained in the Company's
definitive Proxy Statement with respect to its 1998 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) The following documents are filed as a part of this Report:
1. Financial statements: The following is a list of
financial statements which have been incorporated by
reference from the Company's 1997 Annual Report to
Shareholders, as set forth in Item 8:
Report of Arthur Andersen LLP, Independent Public
Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for each of the three
years in the period ended December 31, 1997
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended December 31, 1997
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1997
Notes to Consolidated Financial Statements
2. Financial statement schedule: The following financial
statement schedule for the Company is filed as part of this
Report and should be read in conjunction with the
Consolidated Financial Statements of the Company.
Report of Arthur Andersen LLP, 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.
17
<PAGE>
3. Exhibits: The Exhibits listed on the accompanying Index
to Exhibits are filed as part of, or incorporated by
reference into, this Report, under Item 601 of Regulation
S-K:
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 1986 Shareholders' Agreement (incorporated by reference to the
Company's Form S-1 (File No. 33-9034), filed November 12, 1986).
10.02 401(k) Savings Plan (incorporated by reference to the Company's Form
S-1 (File No. 33-9034), filed September 25, 1986). *
10.03 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). *
10.04 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). *
10.05 Further Amendment to Amended and Restated Employment Agreement
between Right Management Consultants, Inc. and Frank P. Louchheim
dated February 16, 1993 (incorporated by reference to the Company's
report on Form 10-K for the fiscal year ended December 31, 1992,
filed March 31, 1993). *
10.06 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). *
10.07 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).
10.08 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, 1995, filed May 15, 1995).
10.09 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).*
10.10 Directors' 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).*
10.11 Employment Agreement dated December 12, 1995 by and between Right
Management Consultants, Inc. and Richard J. Pinola (incorporated by
reference to the Company's Form 10K for the year ended December
31,1995, filed March 31, 1996). *
* These documents are compensatory plans or agreements required to be filed as
Exhibits.
18
<PAGE>
10.12 Employment Agreement and Supplemental Deferred Compensation Plan
dated December 12, 1995 by and between Right Management Consultants,
Inc. and Joseph T. Smith (incorporated by reference to the Company's
Form 10K for the year ended December 31,1995, filed March 31, 1996).*
10.13 Purchase Agreement between PTR Right Acquisition Co. Inc. and Marti
Smye, Margaret Smith, Richard Zuliani, Margaret Smith Family Trust,
Richard Zuliani Family Trust and People Tech Consulting, Inc. dated
April 10, 1996 (incorporated by reference to the Company's report on
Form 10-Q for the quarter ended March 31, 1996, filed May 14, 1996)
10.14 Employee Stock Purchase Plan of the Company (incorporated by
reference as Exhibit 4 filed in the Company's report on Form S-8
(File No. 333-06211), filed June 18, 1996).*
10.15 Amendment to the 1993 Stock Incentive Plan (incorporated by reference
to the Company's report on Form S-8 (File No. 333-07975), filed July
11, 1996).*
10.16 Credit Agreement between Right Management Consultants, Inc. and its
wholly owned subsidiaries and PNC Bank, National Association dated
December 20, 1996 (incorporated by reference to the Company's Form
8-K, dated January 17, 1997)
10.17 Employment Agreement dated April 10, 1996 by and between Right
Management Consultants, Inc. and Marti Smye (incorporated by
reference to the Company's report on Form 10K for the year ended
December 31, 1997, filed March 28, 1997). *
10.18 Purchase Agreement between and among Right Management Consultants,
Inc. and Frederick R. Davidson, Stradis Pty. Ltd., William D.T.
Cowan, Phillip A. Lovett and David Stratford, and Right D&A Pty. Ltd.
dated July 1,1997.
10.19 Option and Escrow Agreement between and among Right Management
Consultants, Inc. and Frederick R. Davidson, Stradis Pty. Ltd.,
William D.T. Cowan, Phillip A. Lovett and David Stratford, and B&McK
Nominees dated July 1,1997.
13. Portions of the Company's 1997 Annual Report to Shareholders
expressly incorporated by reference.
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP, Independent Public Accountants
27.1 Financial Data Schedule -1997 +
27.2 Financial Data Schedule - 1996 Amended +
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
fiscal quarter ended December 31, 1997.
*These documents are compensatory plans or agreements required to be filed as
Exhibits.
+ 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: 3/26/98
20
<PAGE>
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.
Signatures Title Date
/S/ RICHARD J. PINOLA Chairman of the Board 3/26/98
Richard J. Pinola and Chief Executive Officer
/S/ G. LEE BOHS Chief Financial 3/26/98
G. Lee Bohs Officer and Principal
Accounting Officer
/S/ FRANK P. LOUCHHEIM Director 3/26/98
Frank P. Louchheim
/S/ JOSEPH T. SMITH Director 3/26/98
Joseph T. Smith
/S/ DR. MARTI D. SMYE Director 3/26/98
Dr. Marti D. Smye
/S/ JOHN R. BOURBEAU Director 3/26/98
John R. Bourbeau
/S/ RAYMOND B. LANGTON Director 3/26/98
Raymond B. Langton
/S/ REBECCA J. MADDOX Director 3/26/98
Rebecca J. Maddox
/S/ CATHERINE Y. SELLECK Director 3/26/98
Catherine Y. Selleck
21
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Right Management Consultants, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Right Management Consultants, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 7, 1998. Our audit was made for the purpose of forming an opinion on
those financial statements taken as a whole. The financial statement schedule
listed on page 17 is the responsibility of the Company's management and
is presented for the 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 auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 7, 1998
<PAGE>
Right Management Consultants, Inc.
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years 1997, 1996 and 1995
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Year Expenses Accounts Deductions Year
1997:
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $552,000 $329,000 - $218,000 $663,000
======== ========
Deferred income tax asset valuation
reserve $192,000 -- - $192,000 (1) $ --
======== ========
1996:
Allowance for doubtful accounts $754,000 $28,000 - $230,000 $552,000
======== ========
Deferred income tax asset valuation
reserve -- $192,000 - -- $192,000
========
1995:
Allowance for doubtful accounts $651,000 $400,000 - $297,000 $754,000
======== ========
Deferred income tax asset valuation
reserve $391,000 -- - $391,000 (1) --
========
</TABLE>
(1) Reduction due to the utilization and expiration of certain foreign net
operating losses.
<PAGE>
Exhibit Index
Exhibit No. Description
10.18 Purchase Agreement between and among Right Management
Consultants, Inc. and Frederick R. Davidson, Stradis Pty.
Ltd., William D.T. Cowan, Phillip A. Lovett and David
Stratford, and Right D&A Pty. Ltd. dated July 1,1997.
10.19 Option and Escrow Agreement between and among Right
Management Consultants, Inc. and Frederick R. Davidson,
Stradis Pty. Ltd., William D.T. Cowan, Phillip A. Lovett
and David Stratford, and B&McK Nominees dated July 1,1997.
13 The Company's 1997 Annual Report to Shareholders, portions
of which are incorporated by reference
21 Subsidiaries of the Company
23 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule - 1997 +
27.2 Financial Data Schedule - 1996 Amended +
+ Filed in electronic form only.
EXHIBIT 10.18 - PURCHASE AGREEMENT BETWEEN AND AMONG RIGHT MANAGEMENT
CONSULTANTS, INC. AND FREDERICK R. DAVIDSON, STRADIS PTY LTD, WILLIAM D. T.
COWAN, PHILLIP A. LOVETT AND DAVID STRATFORD, AND RIGHT D&A PTY. LTD. DATED JULY
1,1997
<PAGE>
EXHIBIT 10.18
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, is made and entered into as of the 1ST day
of July, 1997 by, between and among, FREDERICK R. DAVIDSON, STRADIS PTY LTD,
WILLIAM D. T. COWAN, PHILLIP A. LOVETT and DAVID STRATFORD ("Sellers"), RIGHT
MANAGEMENT CONSULTANTS, INC., a Pennsylvania (USA) corporation or its designee
("Buyer") and RIGHT D&A PTY LTD, a Victoria (Australia) corporation ("RDA").
BACKGROUND
Sellers own all of the issued and outstanding capital stock ("Stock") of
RDA, a corporation formed under the laws of the State of Victoria, Australia.
The ownership of the issued capital stock by Sellers is as set forth on Schedule
a hereto. RDA is the owner of 100% of the issued capital stock of the seven
corporations, identified on Schedule B (the "Corporations"), having acquired
such shares from Sellers during June 1997. William D. T. Cowan is the sole
beneficial owner of Stradis Pty Ltd. For purposes of this Agreement, Stradis Pty
Ltd and William D. T. Cowan shall be considered as one Seller, and each shall be
obligated to fulfill any obligation of either hereunder.
Corporations are engaged in the business of providing outplacement, human
resource, organization consulting, and related services principally in
Australia, Singapore, New Zealand and Hong Kong (the "Business"). Davidson &
Associates Pty Ltd., one of the Corporations, and Buyer are parties to a
Corresponding Agreement represented by a letter agreement dated September 20,
1996, which agreement is anticipated to continue between Buyer and RDA
<PAGE>
following the closing.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Purchase and Sale of the Stock.
At the Closing (hereinafter defined), Buyer shall purchase from the
Sellers and the Sellers shall sell and transfer to Buyer 51% of the Stock, free
and clear of all claims, liens, encumbrances, restrictions, and security
interests of any kind whatsoever. The number of shares of the Stock to be sold
by each Seller, and shares remaining after the sale, is set forth on Schedule 1
attached hereto and made a part hereof.
2. Purchase Price.
(a) At the Closing, Buyer shall pay, an aggregate purchase price to
Sellers for the Stock being purchased by it from Sellers, based on a formula
equal to one (1) times the consolidated net sales revenue ("NSR") of the
Corporations for the year ending June 30, 1997. In the event the NSR is not
known at the time of the closing, the purchase price will be based on the actual
NSR for the 11 months ending May 31, 1997, and a June NSR estimate, with an
adjustment to the actual NSR within 15 days of its acceptance by Buyer. "NSR"
shall mean gross client invoicing less credit notes.
-2-
<PAGE>
(b) In the event that an estimate of NSR is used, Sellers will be
responsible for presenting the actual NSR when it is available, and will
communicate the NSR to Buyer. Unless the Buyer shall advise the Sellers of its
objection to the actual NSR within 10 days of Buyer's receipt of the actual NSR,
the actual NSR submitted by the Sellers shall be deemed accepted, and the
adjustment to the purchase price provided for above shall be made within 15 days
of such date. In the event of a disagreement concerning the actual NSR, the
Managing Partner or his/her nominee at the Melbourne Office of the accounting
firm of Arthur Andersen LLP shall, at the expense of Buyer, determine the NSR,
which determination shall be conclusive, and any adjustment of the purchase
price shall take place within 15 days of Arthur Andersen's determination.
(c) Approximately eighty-five percent (85%) of the purchase price will
be paid by Buyer to the Sellers by wire transfer of funds to accounts designated
by each Seller at least ten days prior to the Closing. The balance of the
purchase price (approximately 15%) will be paid by the issuance of shares of the
common stock of Right Management Consultants, Inc. ("RMC") to each Seller.
Shares will be valued on a per share value equal to the average traded closing
price, as reported by the National Association of Securities Dealers, on each of
the days such shares trade during the 30 calendar days prior to the public
announcement by RMC of the acquisition which is the subject of this agreement.
The parties agree that the formula for share value results in each share having
a value, for purposes of this Agreement of US$10.24 The conversion of the price
of each RMC share of stock for purposes of determining the number of
-3-
<PAGE>
shares to be issued, shall be the exchange rate of $US to $A at 11 a.m. on July
1, 1997 based on the average buy and sell quotations as reported by ANZ Bank,
Melbourne, Australia. It is understood that the shares will be issued on or
about July 31, 1997 and will be issued without registration with the United
States Securities and Exchange Commission and will be subject to restrictions
applicable to a private placement of shares. The use of shares as a portion of
the purchase price shall be subject to the following:
(i) The number of shares to be issued to the Sellers shall be
established at the Closing based on the estimated NSR. Any adjustment to the
purchase price based on the determination of the actual NSR shall be made to the
cash portion of the purchase price.
(ii) Notwithstanding that the applicable United States securities
laws may permit resale of the RMC shares outside of the United States, without a
holding period, each Buyer agrees to retain the shares issued as a portion of
the purchase price for a period of one year from the Closing Date, during which
period, each Seller shall refrain from voluntary sale or transfer of such
shares.
3. Closing; Effective Date.
The closing under this Agreement (the "Closing") will take place
simultaneously with the execution of the Agreement (the "Closing Date"), at the
offices of RDA, or at such other
-4-
<PAGE>
time or place as the parties shall mutually agree. The Effective Date of the
Closing will be July 1, 1997.
4. Employment Arrangements. Effective July 1, 1997, RDA or one or more of
the Corporations shall continue the employment of each Seller, individually and
independently, on the terms and conditions of their existing employment with
Corporations, subject to Buyer's standard Policies of Employment, including
restrictive covenants following employment. In addition, and in consideration of
the Purchase Price paid hereunder, each Seller agrees that for a period of two
(2) years from the Effective Date such Seller will not, directly or indirectly,
own, manage, operate, control or in any way whatsoever become associated with
any corporation, partnership or other business entity which is engaged in
activities in competition with the Business, in Australia, Singapore, New
Zealand or Hong Kong (the "Covenant Not to Compete"),
(a) The parties realize that, due to the nature of the Business, the
geographic boundary of the Covenant Not to Compete is reasonable and necessary
to adequately and sufficiently protect Buyer's investment in the Business.
However, if the period of two years for the Covenant Not to Compete is
determined to be unenforceable, then the period shall be one year; and if one
year is determined to be unenforceable, then the period shall be six (6) months.
(b) Each Seller agrees that any breach or threatened breach of the
Covenant Not to Compete may give rise to irreparable harm to RDA and Buyer and,
therefore, said
-5-
<PAGE>
Covenant Not to Compete may be specifically enforced by RDA or Buyer and RDA or
Buyer may, in addition to all other remedies available to it at law or in
equity, be entitled as a matter of right to injunctive relief in any court of
competent jurisdiction.
(c) If the geographic boundary specified in this Paragraph shall be
determined unenforceable, then the geographic area shall be reduced to encompass
all of Australia, or if that area is determined to be unenforceable, then the
states of Victoria and New South Wales.
(d) In the event of the breach by any Seller of the provisions of
this Paragraph, the period stated above applicable to such Seller shall be
extended by the amount of time such Seller was in breach of the provisions.
(e) For the period of two years, or such shorter time determined in
accordance with subparagraph (a) above, each Seller agrees not to directly or
indirectly employ, solicit, entice away or attempt to employ, solicit or entice
away from RDA or any Corporation, whether or not that person would commit a
breach of contract by reason of leaving RDA or any Corporation, any person who
as at the Effective Date was an officer, manager, consultant or employee of RDA
or any Corporation.
(f) Each of the covenants, obligations and restrictions set out in
this Paragraph 4 is separate, severable and independent. If any part of this
Paragraph 4 is wholly or partly void, invalid, or otherwise enforceable, that
clause or
-6-
<PAGE>
part will be deemed eliminated or modified to the extent necessary to make the
balance of this Agreement and that clause or part enforceable.
(g) RDA is joining as a party to this Agreement to the extent
necessary to be able to join with Buyer in seeking to enforce the provisions of
this Paragraph 4.
5. Representations and Warranties of Sellers. Sellers represent and warrant
to Buyer that:
(a) Authority; Ownership. The Sellers are the sole legal and
beneficial owners of the Stock, and have good and marketable title to the Stock,
free and clear of all claims, liens, encumbrances, restrictions, and security
interests of any kind whatsoever. The authorized capital of RDA and each
Corporation is as set forth on Schedule 5(a) hereto. The Stock is the only
issued and outstanding shares of RDA and the Stock has been duly authorized and
validly issued and is outstanding as fully paid and not subject to any further
liability to the corporation. There are no outstanding options or agreements
under which any person or entity has the right, present or future, to acquire
any shares of RDA's or any Corporation's stock or any rights therein. The
Sellers have the full right, personal power and authority to sell and transfer
the Stock as provided herein, without the necessity of obtaining the consent or
permission of any third party.
(b) Corporate Organization; Authority. Each Corporation is validly
constituted in accordance with the Corporation Law of Australia, or its country
of incorporation,
-7-
<PAGE>
and is in compliance with the Corporation Law of Australia or its country of
incorporation, in all material respects, and has the power and authority to own
and use its assets and to carry on its business as it is now conducted. The
execution, delivery and performance of this Agreement will not contravene or
violate or constitute a breach of the terms of any Corporation's Memorandum and
Articles of Association or any agreement to which it is a party.
(c) Binding Obligation. This Agreement has been duly executed and
delivered by Sellers and constitutes the legal, valid and binding obligations of
Sellers in accordance with its terms. The execution, delivery and performance of
this Agreement will not conflict with, result in a breach of, or entitle any
party to terminate or call a default with respect to any contract, instrument,
judgment, order, decree, law, rule or regulation applicable to Sellers or by
which they are bound.
(d) Consents. No consent of any party to any contract or arrangement
to which the Sellers are a party or by which they are bound or to which RDA or
any Corporation is subject is required for the execution, consummation or
performance of this Agreement. To the knowledge of Sellers, no authorization,
approval or consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery or performance of this Agreement by the Sellers, except
approval of the Foreign Investment Review Board of Australia.
(e) Litigation. There are no actions, suits, proceedings, orders,
investigations,
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<PAGE>
or claims pending or, to the knowledge of Sellers, threatened, against or
relating to the Sellers, RDA or any Corporation, or that would affect this
Agreement, or, if adversely determined, could have a material adverse affect on
RDA or any Corporation, or the Business, at law or in equity, or before or by
any federal, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and to the knowledge of
the Sellers there is no reasonable basis for any of the foregoing.
(f) Taxes. RDA and each Corporation has properly prepared and duly
filed all Tax (hereinafter defined) returns or reports required to be filed by
it in a timely manner and all such returns and reports properly and accurately
reflect the Tax payable by RDA or any Corporation for the periods covered
thereby. RDA and each Corporation has paid in full when due all Tax payable
(including payments required to be made by installment) by RDA and each
Corporation at any time prior to the date of this Agreement and proper provision
has been made by the Corporation in its Financial Statements (hereinafter
defined) for Tax payable for periods prior to the Effective Date with respect to
which Tax returns or reports are not yet required to be filed. There are no
agreements, waivers or other arrangements, including for any extension of time,
with respect to the filing of any Tax payment of any governmental charge,
penalty, interest or fine by RDA or any Corporation with respect to the issuance
of any Tax assessment or reassessment. There are no actions, suits, proceedings,
investigations or claims now pending, or to the knowledge of Sellers threatened
or contemplated against RDA or any Corporation in respect of any Tax,
governmental charges, assessments or reassessments or any matters under
discussion with any governmental authority relating to any Tax, governmental
charges,
-9-
<PAGE>
assessments or reassessments or any claims for additional taxes,
governmental charges, assessments or reassessments asserted by any such
authority. RDA and each Corporation has withheld all amounts required by law to
be withheld from payments made by it and has remitted such amounts to the
appropriate authorities within the times required by law. For the purposes of
this Section 5(f), "Tax" means all income, fringe benefits tax, stamp duties,
financial institutions duties, capital payroll, sales and use, value added,
excise, franchise, goods and services and real property taxes and customs and
excise duties, nor any fines, penalties or interest in connection with any of
the foregoing, whether federal, state or local. Neither RDA nor any Corporation
shall have any tax due as a result of the reorganization pursuant to which RDA
became the owner of the shares of each Corporation.
(g) Books and Records. The books and accounts and other corporate
records of RDA and each Corporation relating to the Business are complete and
correct in all material respects, and all material transactions of the Business
have been accurately recorded therein in accordance with generally accepted
Australian Accounting Standards, consistently applied..
(h) Financial Statements. Sellers have delivered to Buyer financial
statements of each Corporation as of and for the year ended June 30, 1996, and
for the ten months ended April 30, 1997 (the "Financial Statements"). The
Financial Statements fairly and accurately present the financial condition of
each Corporation as of the dates thereof and the results of each Corporation's
operations for the periods described therein, in accordance with applicable
generally accepted Australian Accounting Standards principles, consistently
applied. Since April
-10-
<PAGE>
30, 1997, the Corporations have operated the Business only in the ordinary
course; there has been no material and adverse change in the financial
condition, results of operation, assets, business operations or liabilities of
the Business or any Corporation. There are no liabilities of the Business, or of
any Corporation, long-term or short-term, contingent or otherwise, as of the
Effective Date, which are not set forth in the Financial Statements or otherwise
disclosed in this Agreement or the attachments hereto. To the best of Sellers'
knowledge, no liabilities have been incurred since April 30, 1997 other than in
the normal course, except as recorded in the appropriate Corporation's books and
records.
(i) Leases. Schedule 5(i) contains a true and complete schedule of
all of the property leases of premises used by the Corporations in the conduct
of the Business, and of all material leases of personal property used in the
Business (collectively, the "Leases"), listing for each of the Leases the name
and address of the lessor, the lessee, the amount of payments due annually, and
a description of the leased premises or equipment and its location.
(j) Compliance with Laws. To the knowledge of the Sellers,
Corporations are in compliance in all material respects with all existing
requirements of federal, state, local and other laws, regulations and
ordinances, and all existing requirements of all governmental bodies or agencies
having jurisdiction over them and relating to the operation of the Business.
-11-
<PAGE>
(k) Employees and Employee Benefits.
(i) Schedule 5(k) contains an accurate and complete list of all
employees of Corporations as of the date hereof, and their current salaries. The
employment of each employee can be lawfully terminated by such notice as is
required by law without payment of any damages or compensation in excess of the
amount (if any) required by law or any applicable awards.
(ii) Schedule 5(k) also contains an accurate and complete list of
benefits provided by the Corporations for the benefit of one or more employees
of the Corporations ("Plans"). Except as disclosed on Schedule 5(k), there
exists no formal plan or commitment, whether legally binding or not, to create
any additional Plan or change any existing Plan that would affect any employees
or their dependent or beneficiaries.
(iii) The Sellers have heretofore delivered to the Buyer true and
complete copies of each of the following documents: (a) a copy of each of the
Plans, and all amendments thereto; (b) a copy of the most recent description of
each of the Plans that has been provided to employees, and any and all such
other descriptive materials provided to such employees including employee
booklets; and (c) a copy of any advance income tax ruling or related
professional opinion on the tax status of any Plan;
(l) Trade Names, Trademarks, Etc. Schedule 5(l) contains a complete
list of all fictitious names, corporate names, trade names, trademarks, service
marks and business styles, both domestic and foreign, used or held by the
Corporations for use by the Business (the "Marks). Except as disclosed on
Schedule 5(l), to the knowledge of Sellers, the Marks do not
-12-
<PAGE>
infringe upon the fictitious names, corporate names, trade names, trademarks,
service marks, business styles or other proprietary rights or property of any
other party, no other party is infringing upon the Marks, and no such
infringement has been alleged, either by or against any Corporation. Sellers
will not, from and after the Closing Date, use any of the Marks, or any names
similar thereto, except as an employee of RDA or a Corporation.
(m) Insurance Policies. Schedule 5(m) contains a schedule of all
insurance policies owned or maintained by Corporations insuring or relating to
the Corporations or the Business. Said list includes policy numbers, identity of
insurers, and a brief description of the nature of insurance included in each
such policy. All said insurance policies are in full force and effect, and all
premiums thereunder have been paid through the date indicated on the Schedule.
Corporations will continue to maintain such insurance coverage or equivalent
replacement coverage in full force and effect through the Closing Date.
(n) No Misrepresentations. No statement made by Sellers in any
representation, warranty or covenant made by Sellers to Buyer in this Agreement,
or in any other document furnished by Sellers to Buyers in connection with the
transaction contemplated hereby (but not including any forecasts or
projections), contains any untrue statement of material fact, or omits to state
a material fact required to be stated to make such statement, in light of the
circumstances in which such statement was made, not misleading. Any forecasts or
projections provided to Buyers are based on assumptions considered reasonable in
the industry and/or disclosed to Buyer. Sellers shall have no liability in
connection with forecasts or projections unless such forecasts or projections
are intentionally or materially inaccurate.
-13-
<PAGE>
6. Representations and Warranties of Buyer. Buyer represents and warrants
to Sellers as follows:
(a) Organization. Buyer is a corporation organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania, United
States of America.
(b) Corporate Action. The execution, delivery and performance of
this Agreement are within Buyer's corporate authority and have been duly
authorized by proper corporate proceedings of Buyer.
(c) Validity of Agreement. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes the legal, valid, binding and
enforceable obligations of Buyer. The execution and delivery of this Agreement
and its consummation do not require the consent or approval of any third party
and will not result in any breach, violation or default under Buyer's Articles
of Incorporation or By-Laws or of any agreement or decree to which Buyer is a
party or to which Buyer is bound.
7. Conditions to the Obligation of Buyer. Buyer's obligation to consummate
the transaction contemplated by this Agreement is subject to the satisfaction
and fulfillment at or before the date of Closing of each of the following
conditions:
(a) Accuracy of Representations and Warranties and Compliance with
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<PAGE>
Obligations. The representations and warranties of the Sellers contained in
this Agreement shall have been true and correct at and as of the date hereof,
and they shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time. The Sellers shall have
performed and complied with all of their respective obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date. Each
Seller shall have delivered to Buyer a certificate, dated as of the Closing
Date, certifying that such representations and warranties are true and correct
and that all such obligations have been performed.
(b) Certified Resolutions and Certificate of Formation; Good
Standing Certificates. The Sellers shall have delivered to Buyer copies of the
Memorandum and Articles of Association with respect to RDA and each Corporation.
(c) Opinion of Counsel. Buyer shall have received an opinion dated
the Closing Date from Corrs Chambers Westgarth, counsel for the Sellers, in form
and substance as set forth in Exhibit 7(c) attached hereto, which opinion shall
relate only to Sellers and those Corporations formed under the laws of Australia
or any state of Australia.
(d) FIRB. Buyer shall have received approval of its purchase by the
Foreign Investment Review Board of Australia.
(e) Receipt of Necessary Consents. All necessary consents or
approvals of
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<PAGE>
third parties to any of the transactions contemplated hereby shall
have been obtained and delivered to Buyer.
(f) No Adverse Litigation. There shall not be pending or threatened
any third party action or proceeding, not frivolous in nature, by or before any
court or other governmental body which shall seek to restrain, prohibit, or
invalidate the purchase of the Stock by Buyer or any other transaction
contemplated hereby, or which might affect the right of Buyer to own, or control
the Stock, and which, in the judgment of Buyer, makes it inadvisable to proceed
with the transaction contemplated hereby.
(g) Due Diligence. Buyer shall have been satisfied, in its sole and
absolute discretion, with the results of its business, financial, and legal due
diligence investigation of RDA, each Corporation, each Seller, and the Stock.
(h) Option and Escrow Agreement. Sellers and Buyer shall have
entered into the Option and Escrow Agreement granting each various options,
substantially in the form of Schedule 7(h) hereto.
(i) Shareholders Agreement. Sellers and Buyer shall have entered
into the Shareholders Agreement relating to the future management of RDA,
substantially in the form of Schedule 7(i) hereto.
(j) Reorganization. RDA and the Corporations shall have effected the
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<PAGE>
reorganization resulting in the Corporations each being owned 100% by RDA, and
RDA having the ownership set forth on Schedule A hereto, subject only to any
possible delay in issuing share certificates in the name of Right D&A due to
delay occasioned by compliance with the requirements of Stamp Duty.
(k) Non-Compete Agreement. Frederick R. Davidson and Mary Davidson
shall have entered into non-competition agreements in form and substance
satisfactory to Buyer.
(l) Life Insurance. Buyer shall have obtained at its own cost and
expense, life insurance on key management personnel in the amounts shown on
Schedule 7(l) hereto.
(m) Closing Agreement. The parties hereto shall have entered into a
Closing Agreement containing such provisions as shall have been agreed upon
between the negotiation of this Agreement and the Closing.
8. Conditions to Obligation of Sellers. Sellers' obligation to consummate
the transaction contemplated by this Agreement is subject to the satisfaction
and fulfillment at or before the date of Closing of each of the following
conditions:
(a) Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Buyer contained in this
Agreement shall have been true and correct at and as of the date hereof, and
they shall be true and correct at and as of
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<PAGE>
the Closing Date with the same force and effect as though made at and as of that
time. Buyer shall have performed and complied with all of its obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date. Buyer shall have delivered to the Sellers a certificate, dated as
of the Closing Date and signed by one of the senior officers of Buyer,
certifying that such representations and warranties are true and correct and
that all such obligations have been performed.
(b) Deliveries. Buyer shall have delivered to Sellers the following:
(i) The payments of the Purchase Price due at Closing as set
forth in Section 2 hereof.
(ii) Certified copies of resolutions of the Board of Directors of
Buyer authorizing the execution and delivery of this Agreement and the
performance of the transactions contemplated herein.
9. Further Assurances
At Closing and at all times thereafter, the parties shall, upon the
reasonable request of any other party execute all documents, instruments,
certifications and further assurances and take all steps reasonably necessary or
appropriate to implement, confirm or perfect the transactions provided under
this Agreement.
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<PAGE>
10. Indemnification
(a) Sellers shall jointly and severally indemnify, hold harmless and
defend Buyer from and against any and all claims, liabilities, direct losses,
damages (but not including consequential damages), costs, and expense, including
reasonable counsel fees, (each of the foregoing being referred to herein as a
"Loss") incurred or actually sustained by Buyer and not reimbursed by insurance,
by reason of any breach by Sellers or inaccuracy of any of the warranties,
representations, covenants or agreements made by Sellers in this Agreement. In
the event Buyer is entitled to indemnification hereunder, it may offset any
amounts due pursuant to Paragraph 2 above by the amount Buyer is entitled to
receive as indemnification.
(b) Buyer shall indemnify, hold harmless and defend Sellers from and
against any Loss incurred or suffered by Sellers, by reason of any breach by
Buyer or inaccuracy of any of the warranties, representations, covenants or
agreements made by Buyer contained in this Agreement.
(c) As soon as reasonably practical (but in no event later than
twenty days) after receipt by a party hereto (the "Indemnitee") of notice of any
Loss, in respect of which the other party may be liable under this Section 10,
the Indemnitee shall give notice thereof to the other party obligated to provide
indemnification hereunder (the "Indemnifying Party"). The Indemnitee shall
permit the Indemnifying Party, at its option and expense, to assume the defense
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<PAGE>
of any such claim by counsel reasonably satisfactory to the Indemnitee and to
settle or otherwise dispose of the same, provided that the Indemnitee may at all
times, and at its expense, participate in such defense, and provided, further,
that the Indemnifying Party shall not, in defense of any such claim, except with
the prior written consent of the Indemnitee, consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff in question to the
Indemnitee and its affiliates a release of all liabilities in respect of such
claims, or that does not result only in the payment of money damages by the
Indemnifying Party.
(d) Failure by an Indemnitee to give prompt notice to an
Indemnifying Party specified in Section 10(c) above shall not release, waive or
otherwise affect the Indemnifying Party's obligation to indemnify hereunder
except to the extent that the Indemnifying Party can demonstrate actual loss and
prejudice as a result of such failure.
(e) The liability of each Seller hereunder shall be limited to the
purchase price paid by Buyer in cash and RMC shares for the Stock of such
Seller.
(f) No claim for indemnification may be brought by Buyer until the
amount of such claim, aggregated with all other claims asserted hereunder,
exceeds A$75,000, at which time, all claims may be asserted; this amount being a
threshold and not a deductible amount.
11. Survival of Representations
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<PAGE>
All representations, warranties and indemnities made by the parties
herein and pursuant hereto shall survive the Closing. Any claims brought by the
Buyer or the Sellers, as the case may be (whether under a representation or
warranty made under this agreement or any indemnity given under this agreement,
or otherwise), is subject to and limited as follows:
(a) the claimant must give written notice to the other parties of
the general nature of the claim as soon as is reasonable; provided, however,
that failure to give notice shall not limit indemnification except to the extent
of any actual damage resulting from the failure to give notice, and
(b) in any event any written notice must be given on or before the
second anniversary of the Closing Date.
12. Expenses; Sales and Transfer Taxes
The parties hereto shall bear their own respective expenses, including
legal and accounting fees, incident to the preparation and carrying out of this
Agreement. Sellers and Buyer represent and warrant that none has made any
agreement nor taken any action which may cause anyone to become entitled to any
commission as a result of the transactions contemplated hereunder. Buyer shall
be liable for the payment of stamp duty on the transfer of the Stock. Sellers
shall be liable for the payment of stamp duty on the reorganization by which RDA
became the owner of all shares of each Corporation.
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<PAGE>
13. Miscellaneous.
(a) Notices. All notices, demands and other communications to be
made hereunder ("Notice") shall be given in writing and shall be deemed to have
been duly given if personally delivered or sent by certified or registered mail,
postage prepaid, return receipt requested, to the other party at the following
address (or to such other address as may be given by Notice by any party):
If to Buyer: G. Lee Bohs, Executive V. P. & CFO
Right Management Consultants, Inc.
1818 Market Street, 33rd Floor
Philadelphia, PA 19103-3614
With copy to: Theodore A. Young, Esquire
Fox, Rothschild, O'Brien & Frankel, LLP
2000 Market Street, 10th Floor
Philadelphia, PA 19103
If to Sellers: Frederick R. Davidson
Right D&A Pty Ltd
5/607 St. Kilda Road
Melbourne, Victoria 3004
Australia
With copy to: Harvey Cook
Whelan & Cook
16th Floor, 499 St. Kilda Road
Melbourne, Victoria 3004
Australia
Notice shall be deemed effective, if personally delivered, when
delivered, and if mailed, at midnight on the fifth business day after deposit in
the mail.
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<PAGE>
(b) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
(c) Governing Law. This Agreement is to be governed, construed and
enforced in accordance with the laws of the State of Victoria, Australia.
(d) Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
(e) Entire Agreement. This Agreement and the documents attached as
exhibits and schedules hereto, when executed will contain the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and thereof, and supersede all prior written and oral negotiations,
agreements and writings.
(f) Modification. This Agreement may be amended, superseded,
terminated or extended, and the terms hereof may be waived, only by a written
instrument signed by all of the parties or, in the case of a waiver, signed by
the party waiving compliance.
(g) Preservation of Rights. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the
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<PAGE>
part of any party of any such right, power or privilege, nor any single or
partial exercise of any right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege. The rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies that any party may otherwise have at law or in equity.
(h) Provisions Severable. The provisions of this Agreement are
independent of and severable from each other. No provisions will be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
one or more of any of the provisions hereof may be invalid or unenforceable in
whole or in part.
(i) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
RIGHT MANAGEMENT CONSULTANTS, INC.
BY: /S/ RICHARD J. PINOLA
Richard J. Pinola, Chairman of the Board
and Chief Executive Officer
SELLERS:
BY: /S/ FREDERICK R. DAVIDSON
Frederick R. Davidson
STRADIS PTY LTD
BY:/S/ WILLIAM D. T. COWAN
William D. T. Cowan
BY: /S/ WILLIAM D. T. COWAN
William D. T. Cowan
BY: /S/ PHILLIP A. LOVETT
Phillip A. Lovett
BY: /S/ DAVID STATFORD
David Stratford
RIGHT D&A PTY LTD
BY: /S/ FREDERICK R. DAVIDSON
Frederick R. Davidson
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<PAGE>
STOCK PURCHASE AGREEMENT
Right D&A Pty Ltd
July 1, 1997
List of Schedules
A. Share Holdings of Sellers
B. Corporations
1. Shares to be Sold; Shares Remaining
5(a). Authorized Capital of RDA and each Corporation
5(i). Leases
5(k). Employees/Salaries/Benefits
5(l). Trade Names
5(m). Insurance
7(c). Legal Opinion of Sellers' Counsel
7(h). Option and Escrow Agreement
7(i). Shareholders Agreement
7(k). Employees with Non-Compete Agreement
7(l). Life Insurance Obtained by Buyer
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<PAGE>
STOCK PURCHASE AGREEMENT
Right D&A Pty Ltd
July 1, 1997
Schedule A
Seller Shares
Frederick R. Davidson 60,000
Stradis Pty Ltd. 20,000
Phillip A. Lovett 10,000
David Stratford 10,000
-------
100,000
=======
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<PAGE>
STOCK PURCHASE AGREEMENT
Right D&A Pty Ltd
July 1, 1997
Schedule B
<TABLE>
<CAPTION>
<S> <C> <C>
Corporation Place of Incorporation Regulation Number
Davidson & Associates Pty Ltd Victoria, Australia ACN 006 132 163
Davidson & Associates International P/L Victoria, Australia ACN 057 253 424
Davidson & Associates (ACT) Pty Ltd Canberra, Australia ACN 008 633 609
Davidson & Associates(QLD) Pty Ltd Queensland, Australia ACN 010 817 384
Davidson & Associates (NSW) Pty Ltd New South Wales, Australia ACN 002 893 576
Davidson & Associates Limited Hong Kong ---------------
Davidson & Associates Limited New Zealand ---------------
</TABLE>
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<PAGE>
STOCK PURCHASE AGREEMENT
Right D&A Pty Ltd
July 1, 1997
Schedule 1
Shares Shares (Percentage) Shares Remaining
to be Sold
Frederick R. Davidson 34,000 (67%) 26,000
Stradis Pty Ltd 7,000 (14%) 13,000
Phillip A. Lovett 5,000 (10%) 5,000
David Stratford 5,000 (10%) 5,000
------ ---- ------
51,000 (100%) 49,000
====== ==== ======
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<PAGE>
STOCK PURCHASE AGREEMENT
Right D&A Pty Ltd
July 1, 1997
Exhibit 7(c)
(a) each Corporation has been duly incorporated under the laws of its
place of incorporation and is validly registered and existing under
the Corporations Law of Australia;
(b) each Corporation has the corporate power and corporate authority to
own all of its assets and to carry on its business as described in the
Agreement;
(c) the Agreement has been duly executed and delivered by the Sellers and
is the legal, valid and binding obligation of the Sellers, enforceable
against the Sellers in accordance with its terms;
(d) the execution, delivery and performance by the Sellers of the
Agreement does not conflict with the Articles of Association of RDA or
any Corporation, or with any Victoria or federal law, rule or
regulation;
(e) the authorised capital of RDA is $100,000 comprised of 100,000
ordinary shares with a par value per share of $1.00, of which 100,000
shares are validly issued and fully paid;
(f) to our knowledge, after inquiry of the Sellers, there are not options,
warrants or rights of any kind for the purchase or acquisition of any
shares of RDA's or any Corporation's capital stock; and
(g) to our knowledge, after inquiry of the Sellers, there is no action,
proceeding or investigation pending or threatened against RDA or any
Corporation or that questions the validity of the Agreement or the
other documents executed in connection therewith, or any action taken
or to be taken pursuant thereto or any claim or legal action against
RDA or any Corporation that, if adversely decided, would materially
adversely affect RDA or any Corporation.
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EXHIBIT 10.19 -OPTION AND ESCROW AGREEMENT BETWEEN AND AMONG RIGHT MANAGEMENT
CONSULTANTS, INC. AND FREDERICK R. DAVIDSON, STRADIS PTY LTD, WILLIAM D. T.
COWAN, PHILLIP A. LOVETT AND DAVID STRATFORD, AND B&MCK NOMINEES DATED JULY 1,
1997
<PAGE>
RIGHT D&A PTY LTD OPTION AND ESCROW AGREEMENT
THIS OPTION AND ESCROW AGREEMENT, is made and entered into as
of the first day of July, 1997 by, between and among, FREDERICK R. DAVIDSON,
STRADIS PTY LTD, WILLIAM D. T. COWAN, PHILLIP A. LOVETT and DAVID STRATFORD
("Sellers"), RIGHT MANAGEMENT CONSULTANTS, INC., a Pennsylvania corporation or
its designee ("Buyer"), and B&McK NOMINEES (VIC) PTY LTD (ACN 006 599 543) of
Level 39 Rialto, 525 Collins Street, Melbourne, 3000 ("Escrow Agent").
BACKGROUND
Simultaneously with the execution of this Agreement, Buyer is
purchasing 51% of the outstanding shares of Right D&A Pty Ltd ("RDA") from
Sellers. Sellers have agreed to provide Buyer with the options contained herein
to permit Buyer to acquire the remaining 49% of the outstanding shares of RDA on
the terms and conditions of this Agreement, and Buyer has agreed to provide
Sellers with the options contained herein to permit Sellers to require Buyer to
acquire the shares. William D. T. Cowan is the sole beneficial owner of Stradis
Pty Ltd. The shares subject to options are all of the shares owned by Sellers as
set forth on Schedule 1 attached hereto.
NOW, THEREFORE, intending to be legally bound, it is agreed as follows:
1. Options.
(a) Each Seller hereby grants to Buyer a series of
options, commencing July 1, 2000 and exercisable as of July 1, 2000 and annually
thereafter, subject to
<PAGE>
acceleration as provided in Paragraph 3, to purchase the number of RDA Shares
represented by the percentage points shown on the chart in subparagraph 1(c)
below corresponding to the anniversary dates shown on the chart. Each exercise
of an option by Buyer shall result in each Seller selling an amount of shares
owned by each in proportion to the total shares owned by all Sellers at such
time, unless the Sellers advise Buyer otherwise, in writing, within 30 days of
the exercise of any option by Buyer, in which case the shares to be purchased
pursuant to the exercise of the option shall be as specified in the writing from
Sellers.
(b) Each Seller is hereby granted by Buyer a series
of options, as described below. Each exercise of an option by a Seller shall
require Buyer to purchase up to the total shares subject to the options at such
time as shown below; provided, however, if more than one Seller exercises an
option at any anniversary date and the number of shares exceeds the number of
shares Buyer is required to purchase, the aggregate number of shares purchased
by Buyer shall be reduced to the maximum required amount, and such shares shall
be purchased from the Sellers who exercised options at that time in proportion
to their ownership of shares of RDA at that time.
(c) The options of this Paragraph 1 held by Sellers
shall be cumulative and shall commence on each anniversary date of the date of
this agreement, on the following schedule:
-2-
<PAGE>
<TABLE>
<CAPTION>
RDA Shares Available for Sale Measured by
Percentage Points of Total RDA Shares
Anniversary Date (Cumulative less any shares previously acquired)
<S> <C> <C>
Third, July 1, 2000 up to 10% points
Fourth, July 1, 2001 up to 20% points
Fifth, July 1, 2002 up to 30% points
Sixth, July 1, 2003 up to 40% points
Seven, July 1, 2004, up to 49% points
and each Anniversary
Date thereafter
</TABLE>
2. Notice of Exercise of Option; Closing; Fiscal Year. Options
may be exercised effective on each Anniversary Date. In each case of the
exercise of an option set forth in paragraph 1 above, written notice of the
exercise shall be given to the other parties to this Agreement, including the
Escrow Agent, not later than May 31 of each fiscal year. Closing will take place
the last business day of the month following the end of the fiscal year. All
exercises during a fiscal year pursuant to options contained elsewhere in this
Agreement, shall be counted towards the limitation on annual exercises. For
purposes of this Agreement, a "fiscal year" shall be the 12 months ended June 30
each year.
3. Limitation on Seller Options; Acceleration of Buyer
Options. The options stated above held by Sellers are cumulative and
discretionary with the Sellers, provided, however, during any fiscal year no
more than 20% points of the shares subject to options be required to be
purchased by Buyer. Buyer may, in its sole discretion, accelerate its
acquisition of shares from Sellers outlined in the table of Paragraph 1 above,
and may purchase any or all RDA shares as of any anniversary date from July 1,
2000 and thereafter.
-3-
<PAGE>
4. Additional Options. In the event any Seller, or any
person(s) who acquire(s) shares of RDA from any Seller, as permitted by this
agreement, shall no longer be associated with RDA or its subsidiaries as an
active full-time employee, whether by voluntary or involuntary termination of
employment including a termination based on sickness, incapacity or death (a
"Triggering Event"), Buyer shall have the right to acquire the shares of such
person; provided, however, such purchase must be made by Buyer in the case of
the death of an individual shareholder. The reference to Seller in the foregoing
sentence shall mean William D. T. Cowan in the case of shares owned by Stradis
Pty Ltd. Upon the effectiveness of such a Triggering Event, and Buyer's
obtaining written notice of the event by the remaining Sellers, by RDA or
otherwise, Buyer shall have an additional option to acquire the shares, which
option shall remain outstanding for ninety (90) days from the receipt of notice
to Buyer or Buyer becoming aware of the Triggering Event, whichever is later. If
Buyer exercises the option within said 90 days, it shall close on the purchase
of these shares 30 days after its exercise of the additional option. In the
event Buyer does not exercise an option arising from a Triggering Event, the
shares shall continue to be held by the owner thereof subject to the option and
escrow provisions contained herein.
5. Purchase Price. In each exercise of an option granted in
Paragraph 4 above, the purchase price shall be based on the proportional
interest of the shares in the total shares outstanding as related to the actual
consolidated net sales revenue of RDA for the twelve months ended the last day
of the quarter preceding the date of the Triggering Event; and in the case of
Paragraph 1 above, the actual consolidated net sales revenue of RDA for the
fiscal year
-4-
<PAGE>
ending June 30 immediately prior to the applicable anniversary date. "Net Sales
Revenue" shall mean gross client invoices less credit notes.
6. Permitted Transfers; Definition of "Seller". After July 1,
2000, the Sellers may transfer shares among themselves, provided that all such
shares shall remain subject to the options and the escrow provisions contained
herein, and a right of first refusal in favor of Buyer. Any planned transfer
shall be noticed to Buyer at least 60 days and allow Buyer 30 days to buy such
shares on the terms and conditions of the intended transfer. In addition,
subject to the approval of Buyer and all Sellers, which approval shall not be
unreasonably withheld, shares owned by the Sellers may be sold to full-time
employees of RDA and its subsidiaries, or potential full-time employees,
provided that all such shares shall remain subject to the option and the escrow
provisions, contained herein; and further provided that Buyer shall have right
of first refusal, as described above in this Paragraph 6, in connection with
such proposed sale. Each permitted transferee hereunder shall be referred to as
a Seller for purposes of this Agreement; and, prior to the acquisition of any
shares of RDA, shall execute a deed for the purpose of agreeing to be bound by
this Agreement. Any Seller who no longer owns shares of RDA shall not be deemed
a Seller for purposes of this Agreement. For purposes of this Agreement, Stradis
Pty Ltd and William D. T. Cowan shall be considered as one Seller, and shall
determine how any of their rights hereunder shall be exercised as between the
two; provided, however, each shall be obligated to fulfill any obligations of
either hereunder.
-5-
<PAGE>
7A. Change of Control of RMC.
(a) Rights of Sellers. In the event that: (1) a
"controlling interest" in the capital stock of RMC is sold in a single
transaction or a group of related transactions to one or more buyers acting in
concert; (2) RMC sells all or substantially all of its assets; or (3) RMC is a
party to any corporate merger or consolidation resulting in one or more parties
acting in concert who did not previously hold a "controlling interest" in the
capital stock of RMC, owning a controlling interest in RMC or its successor
entity (each such event constitutes a "change in control"), each Seller shall
have the right, if exercised within 12 months of the later of (i) the date
Sellers are advised of the change of control by the Buyer, or (ii) the effective
date of the change in control, to require RMC to purchase such Seller's
remaining shares in accordance with the purchase price applicable to a purchase
pursuant to the options granted in Paragraph 4 above, with the Triggering Event
being the effective date of a change in control described herein, or at their
option reacquire all RDA shares pursuant to subparagraph 7A(c) below. A Closing
on the purchase of shares shall occur within 90 days of Sellers' exercise of
either of the options of this Paragraph 7A(a).
(b) Definitions. For the purposes of this section, 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 the 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
-6-
<PAGE>
"controlling interest". The foregoing provisions shall not apply in the event
that the buyer or buyers of a controlling interest, purchaser of assets, or
merger party is controlled by a member or members of the Board of Directors or
management of the Company prior to the event related to a change of control.
(c) Buy Back. In addition to the option to require
Buyer to purchase shares in accordance with this Paragraph 7A, in the event of a
"change of control" within twelve (12) months of the later of (i) the date
Sellers are advised of the change of control by the Buyer, or (ii) the effective
date of the change in control, the Sellers who have not exercised their right to
require Buyer to acquire their shares, shall have the option to buy back the RDA
shares owned by Buyer or any entity owned by Buyer, which option shall be in
proportion to their then ownership of RDA shares or as otherwise agreed to by
the Sellers who exercise this Buy Back option; provided, however, Buyer, and
entities controlled by Buyer, shall not be required to sell back the RDA shares
unless Sellers acquire all RDA shares then owned by Buyer or entities controlled
by Buyer, including any shares any Seller requires Buyer to acquire on a "change
of control" pursuant to this Paragraph 7A. In addition, one or more of the
Sellers may require Buyer, or any entity owned by Buyer, to sell its RDA shares
to the Sellers who exercise their right, in proportion to their then ownership
of RDA Shares, if such Sellers have exercised the rights of Paragraph 7A(a) and
Buyer has failed to purchase the shares, provided, however, such additional
right must be exercised within thirty (30) days of Buyer's failure to purchase
the shares; and further provided that Buyer and entities conducted by it shall
only be required to sell back its RDA Shares if all such shares are being
purchased. The purchase price of a buy back shall be the
-7-
<PAGE>
lesser of the price per share at their acquisition by Buyer (or its affiliate),
or the price per share pursuant to the formula used for a purchase pursuant to
Paragraph 4 above.
7B. Sale of RDA Shares by Buyer.
(a) In the event that Buyer, or any entity controlled
by Buyer, intends to voluntarily sell any or all RDA shares owned by it during
the term of this Agreement, it shall first offer the shares to the Sellers on
the terms and conditions of the proposed sale, and give the Sellers sixty (60)
days from their being advised of a proposed sale, to exercise a right of first
refusal to acquire the shares, in proportion to their then ownership of RDA, on
the terms and conditions of the proposed sale. When advising Seller of the terms
and conditions of the proposed sale, Buyer shall also advise Sellers of the
identity of the proposed purchaser. If less than all the Sellers have exercised
the option at the end of the 60 days, any shares not purchased shall be offered
to the Sellers exercising the option for a period of an additional 14 days.
Buyer shall only be obligated to sell the shares to the Sellers if one or more
Sellers are acquiring all the shares offered. If not, Buyer is free to sell the
shares to one or more third parties on the terms described in the notice to
Sellers, so long as such sale is closed within 90 days of the end of the notice
period described above, and so long as such sale terms and conditions are not
more favorable to the purchaser(s) than as described to Seller in the notice of
proposed sale.
(b) Furthermore, in the event Buyer is selling all of
its shares of RDA, it shall use its best efforts to have the purchaser offer to
acquire all shares of RDA owned by Sellers on the same terms and conditions as
the purchaser of Buyer's shares.
-8-
<PAGE>
(c) In matching a third party offer which includes
considerations other than cash or cash equivalent consideration, Sellers'
matching offer may convert any non-cash or non-cash equivalent consideration to
an amount of cash which will give Buyer the same economic benefit of the third
party offer.
(d) In the event of a sale by Buyer to a third party,
that party shall be a permitted assignee, subject to the terms of this
Agreement, including execution of a deed as described in Paragraph 9 below,
except that in the case of a sale of all of Buyer's RDA shares, the provisions
of Paragraph 7A shall no longer apply.
(e) Buyer may not, without the prior written approval
of all the Sellers, voluntarily sell any RDA Shares, other than to an entity
under its control, prior to July 1, 2000.
8. Escrow Arrangements. To facilitate the closing of the
purchase of any shares acquired pursuant to the exercise of an option hereunder,
all shares of RDA owned by Sellers and Buyer shall be placed in escrow with the
Escrow Agent subject to the following:
(a) Escrow. Certificates representing the shares
shall remain in the name of the registered owners who shall provide one or more
signed blank share transfer forms, also to be placed in escrow.. Any transfers
of ownership shall be effected by the issuance of one or more certificates to
the purchaser and the issuance of one or more certificates representing the
balance of the shares to the registered owner. Buyer acknowledges that the
Shares acquired by it
-9-
<PAGE>
at the Closing held as of July 1, 1997 will remain in the name of each Seller
until the stamp duty has been paid and new certificates issued.
(b) Receipt of Shares. The Escrow Agent hereby
acknowledges receipt of the escrowed shares, as identified on Schedule 1 hereof,
and agrees to hold such shares in escrow as agent for Buyer and Sellers, to be
distributed and released as provided herein.
(c) Release. On July 31, 2004, unless otherwise
instructed by Buyer and all Sellers, Escrow Agent shall return all shares not
purchased by Buyer to their respective owner.
(d) Disputes. In the event of a dispute among the
parties, the Escrow Agent shall hold the shares until the rights of the parties
hereto have been determined by final judgment of a court of competent
jurisdiction and the Escrow Agent shall have received evidence reasonably
satisfactory to it of such final judgment, at which time the Escrow Agent shall
promptly act in accordance with such final judgment. A "final judgment" for
these purposes shall be a judgment as to which the period of time for appealing
such judgment has expired without an appeal's having been timely made, or, if an
appeal is timely made, as to which such appeal has been disposed of and there is
no recourse to further appeals.
(e) Joint Instructions. The Escrow Agent shall, in
addition, disburse the shares in accordance with any joint written instructions
received from all Sellers (as defined in Paragraph 6) and Buyer.
-10-
<PAGE>
(f) Responsibility. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein. In the event the
Escrow Agent becomes involved in litigation by reason hereof, it is hereby
authorized to deposit with the Clerk of the Court in which such litigation is
pending the shares then held by it pursuant hereto and, thereupon, the Escrow
Agent shall stand fully relieved and discharged of any further duties hereunder,
except to the extent that such court shall instruct the Escrow Agent to act. In
the event the Escrow Agent is threatened with litigation by reason hereof, it is
further hereby authorized to interplead all interested parties in any court of
competent jurisdiction and to deposit with the Clerk of such Court the shares
then held by it pursuant hereto and, thereupon, it shall stand fully relieved
and discharged of any further duties hereunder, except to the extent that such
court shall instruct the Escrow Agent to act.
(g) Liability. The Escrow Agent shall not be liable
for any action taken or omitted by it in good faith and reasonably believed by
it to be authorized or within the rights or powers conferred upon it by this
Agreement, and may consult with counsel of its own choice and shall have full
and complete authorization in good faith to act or refrain from acting in
accordance with the opinion of such counsel. In no event shall the Escrow Agent
be required to account for any funds subsequent to disposition thereof by the
Escrow Agent.
(h) Reliance. The Escrow Agent may rely and shall be
protected in acting, or refraining from acting, upon any written notice,
instruction or request furnished to it hereunder and reasonably believed by it
to be genuine and to have been signed or presented by the proper party or
parties.
-11-
<PAGE>
(i) Indemnification of Escrow Agent. Buyer and each
of the Sellers hereby agree jointly and severally to indemnify the Escrow Agent
for, and to hold it harmless against any loss, liability, or expense incurred
without negligence or bad faith on the part of the Escrow Agent, arising out of
or in connection with its entering into this Agreement and its performance of
its duties hereunder, including the costs and expenses of defending itself
against any claim of liability in the premises, and to pay or reimburse the
Escrow Agent upon request for all expenses, disbursements and advances,
including the costs of reasonable attorneys' fees, incurred or made by it in
connection with carrying out its duties hereunder.
(j) Resignation. The Escrow Agent may resign and be
discharged from its duties hereunder at any time by giving not less than 15 days
notice of such resignation to the Buyer, the RDA and the Sellers specifying the
date when such resignation shall take effect. Promptly after such notice, a
successor escrow agent shall be appointed by mutual agreement of the Buyer, the
RDA and the Sellers, such successor escrow agent to become Escrow Agent
hereunder upon the resignation dated specified in such notice. If Buyer, the
Company and the Stockholders are unable to agree upon a successor escrow agent
within fifteen days of such notice, the Escrow Agent shall continue to serve
until its successor accepts the escrow and receives the Escrow Deposit.
(k) Expenses. Buyer shall pay all routine fees, costs
and expenses of the Escrow Agent throughout the term of the escrow. In the case
of a dispute, except for extraordinary expenses, if any, resulting from
additional services related to the dispute among the parties, each party shall
bear its own legal and accounting costs and expenses related to the
-12-
<PAGE>
dispute, and Escrow Agent's extra costs and expenses, if any, resulting from a
dispute will be paid by each party in proportion to its ownership of Shares of
RDA, including any amounts payable pursuant to subparagraph 8(i) above.
9. Assignment; Successors. Buyer shall have the right to
assign the options, or any portion of the options to any entity controlled by
it; provided, however, should such entity no longer be controlled by Buyer, the
RDA Shares and options shall be reassigned to Buyer or assigned to an entity
controlled by Buyer. Subject to the terms hereof, Sellers may assign their
shares of RDA. Any permitted assignee of Buyer or Seller must execute a deed for
the purpose of agreeing to be bound by this Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their permitted
assigns, respective heirs, personal representatives, successors and assigns.
10. Termination. This Agreement will automatically terminate
whenever Buyer shall be the owner of 100% or none of the outstanding shares of
RDA.
11. Governing Law. This agreement shall be governed by the
laws of the State of Victoria, Australia and applicable the federal laws of
Australia.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
RIGHT D&A PTY LTD
BY: /S/ FREDERICK R. DAVIDSON
Frederick R. Davidson
RIGHT MANAGEMENT CONSULTANTS, INC.
BY: /S/ RICHARD J. PINOLA
Richard J. Pinola
SELLERS:
BY: /S/ FREDERICK R. DAVIDSON
Frederick R. Davidson
STRADIS PTY LTD
BY: /S/ WILLIAM D. T. COWAN
William D. T. Cowan
BY: /S/ WILLIAM D. T. COWAN
William D. T. Cowan
BY: /S/ PHILLIP A . LOVETT
Phillip A. Lovett
BY: /S/ DAVID STRATFORD
David Stratford
B&McK NOMINEES (VIC) PTY LTD, as
Escrow Agent
BY: /S/ B&MCK NOMINEES (VIC) PTY LTD
-14-
<PAGE>
OPTION AND ESCROW AGREEMENT
Right D&A Pty Ltd
Schedule 1
Shareholders Shares
Right Management Consultants, Inc. 51,000
Frederick R. Davidson 26,000
Stradis Pty Ltd 13,000
Phillip A. Lovett 5,000
David Stratford 5,000
-------
100,000
=======
-15-
EXHIBIT 13 - 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Right Management Consultants, Inc.
Selected Financial Data
(Dollars and Shares in Thousands Except Earnings Per Share and Stock Prices)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations (1)
- - --------------------------------------------------------------------------------------------------------------------------------
Total revenue $125,786 $125,269 $114,005 $89,134 $70,726
- - --------------------------------------------------------------------------------------------------------------------------------
Costs and expenses 121,366 108,994 101,090 79,345 64,279
- - --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 4,420 16,275 12,915 9,789 6,447
- - --------------------------------------------------------------------------------------------------------------------------------
Net income 2,073 9,675 7,819 5,714 3,297
- - --------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share (2)(3) $ 0.31 $ 1.45 $ 1.24 $ 0.93 $ 0.56
- - --------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average number of 6,725 6,663 6,290 6,125 5,918
shares outstanding (2)(3)
- - --------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
- - --------------------------------------------------------------------------------------------------------------------------------
Working capital $ 15,491 $ 25,342 $ 13,134 $ 9,883 $ 8,940
- - --------------------------------------------------------------------------------------------------------------------------------
Total assets 81,704 73,935 60,231 48,969 35,734
- - --------------------------------------------------------------------------------------------------------------------------------
Long-term obligations 10,597 8,768 7,360 6,004 2,403
- - --------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 50,450 47,801 33,626 24,405 18,032
- - --------------------------------------------------------------------------------------------------------------------------------
Total debt-to-equity ratio 25% 17% 28% 28% 16%
- - --------------------------------------------------------------------------------------------------------------------------------
Return on average equity 4% 24% 27% 27% 20%
- - --------------------------------------------------------------------------------------------------------------------------------
Stock Price Ranges
- - --------------------------------------------------------------------------------------------------------------------------------
Low price (3) $ 8.75 $ 15.00 $ 6.89 $ 6.55 $ 3.33
- - --------------------------------------------------------------------------------------------------------------------------------
High price (3) 23.50 27.50 19.50 11.11 9.22
- - --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) See Note C to the Consolidated Financial Statements for information
regarding acquisitions.
(2) See Note K to the Consolidated Financial Statements for information
regarding earnings per share.
(3) Amounts presented have been restated for both the November 1995 and July
1996 three-for-two stock splits (see Note J to the Consolidated Financial
Statements).
</FN>
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders 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, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. 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 consolidated financial position of Right Management
Consultants, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 7, 1998
<PAGE>
Right Management Consultants, Inc.
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31,
1997 1996
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,583 $ 18,055
Accounts receivable, trade, net of allowance for doubtful accounts
of $663 and $552 in 1997 and 1996, respectively 21,888 18,878
Royalties and fees receivable from Affiliates 2,511 3,505
Prepaid expenses and other current assets 1,681 1,868
Deferred income taxes 1,074 402
-------- --------
Total current assets 34,737 42,708
Property and equipment, net 13,342 9,666
Intangible assets, net 30,703 18,724
Deferred income taxes 1,426 1,588
Other 1,496 1,249
-------- --------
Total Assets $ 81,704 $ 73,935
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt and other obligations $ 3,943 $ 1,011
Accounts payable 4,651 4,584
Commissions payable 1,431 952
Accrued incentive compensation and benefits 2,022 4,651
Other accrued expenses 4,272 2,300
Deferred income 2,927 3,868
-------- --------
Total current liabilities 19,246 17,366
-------- --------
Long-term debt and other obligations 8,775 6,904
-------- --------
Deferred compensation 1,822 1,864
-------- --------
Minority interest in subsidiary 1,411 --
-------- --------
Commitments and Contingent Liabilities (Notes E, G and I)
Shareholders' Equity (Note J):
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
7,084,104 and 6,713,573 shares issued in 1997 and 1996, respectively 71 67
Additional paid-in capital 14,492 11,956
Retained earnings 38,363 36,290
Cumulative translation adjustment (580) 5
-------- --------
52,346 48,318
Less treasury stock, at cost, 380,452 and 252,952 shares in 1997
and 1996, respectively (1,896) (517)
-------- --------
Total shareholders' equity 50,450 47,801
-------- --------
Total Liabilities and Shareholders' Equity $ 81,704 $ 73,935
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Income
(Dollars and Shares in Thousands Except Earnings per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Revenue:
Company office revenue $ 122,281 $ 120,679 $ 109,741
Affiliate royalties 3,505 4,590 4,264
--------- --------- ---------
Total revenue 125,786 125,269 114,005
Expenses:
Consultants' compensation 52,085 47,624 42,518
Office sales and consulting support 7,071 5,661 4,797
Office administration 48,061 42,665 41,110
General sales and administration 13,364 13,080 12,236
Restructuring costs (Note B) 630 -- --
--------- --------- ---------
121,211 109,030 100,661
--------- --------- ---------
Income from operations 4,575 16,239 13,344
--------- --------- ---------
Other income (expense):
Interest income 663 606 302
Interest expense (818) (570) (731)
--------- --------- ---------
(155) 36 (429)
--------- --------- ---------
Income before income taxes 4,420 16,275 12,915
Provision for income taxes 2,009 6,600 5,096
Minority interest in net income of subsidiary 338 -- --
--------- --------- ---------
Net income $ 2,073 $ 9,675 $ 7,819
========= ========= =========
Basic earnings per share $ 0.31 $ 1.55 $ 1.31
========= ========= =========
Diluted earnings per share $ 0.31 $ 1.45 $ 1.24
========= ========= =========
Basic weighted average shares outstanding 6,596 6,252 5,984
========= ========= =========
Diluted weighted average shares outstanding 6,725 6,663 6,290
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Shareholders' Equity
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
Cumulative Total
Common Stock Additional Retained Translation Treasury Stock Shareholders'
Shares Par Value Paid-in Capital Earnings Adjustment Shares Cost Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 2,891,971 $29 $6,544 $18,830 $(481) 252,952 $(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 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) 252,952 (517) 33,626
Stock options exercised 316,039 3 1,332 -- -- -- -- 1,335
Tax benefit from exercise -- -- 2,223 -- -- -- -- 2,223
of stock options
Shares issued under restricted 29,250 -- 658 -- -- -- -- 658
stock awards
Three-for-two stock split 2,050,100 21 -- (21) -- -- -- --
Shares issued under the Employee 4,368 -- 88 -- -- -- -- 88
Stock Purchase Plan
Translation adjustment -- -- -- -- 196 -- -- 196
Net income -- -- -- 9,675 -- -- -- 9,675
--------- --------- --------- --------- --------- --------- -------- ---------
Balance, December 31, 1996 6,713,573 67 11,956 36,290 5 252,952 (517) 47,801
Stock options exercised 236,095 3 1,198 -- -- -- -- 1,201
Tax benefit from exercise -- -- 597 -- -- -- -- 597
of stock options
Davidson & Associates
acquisition (Note C) 96,577 1 988 -- -- -- -- 989
Shares issued under the Employee 37,859 -- 386 -- -- -- -- 386
Stock Purchase Plan
Restricted stock compensation -- -- (633) -- -- -- -- (633)
Repurchase of common stock -- -- -- -- -- 127,500 (1,379) (1,379)
Translation adjustment -- -- -- -- (585) -- -- (585)
Net income -- -- -- 2,073 -- -- -- 2,073
--------- --------- --------- --------- --------- --------- -------- ---------
Balance, December 31, 1997 7,084,104 $71 $14,492 $38,363 $(580) 380,452 $(1,896) $50,450
========= ========= ========= ========= ========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Operating Activities:
Net income $ 2,073 $ 9,675 $ 7,819
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,494 4,923 4,284
Deferred income taxes (510) (169) (93)
Restricted stock compensation (633) 658 230
Restructuring costs (Note B) 630 -- --
Tax benefit from the exercise of stock options 597 2,223 252
Revenue recognized upon completion of incomplete
contracts assumed in acquisitions (807) (512) (630)
Provision for doubtful accounts 329 28 400
Other non-cash items 6 444 241
Changes in operating accounts:
Accounts receivable, trade and from Affiliates 531 (460) (3,504)
Prepaid expenses and other assets (596) 499 (787)
Accounts payable and accrued expenses (5,620) 640 (2,333)
Commissions payable and other liabilities 1,414 (1,782) 366
Deferred income (941) 459 1,090
-------- -------- --------
Net cash provided by operating activities 2,967 16,626 7,335
-------- -------- --------
Investing Activities:
Purchase of property and equipment (5,201) (4,873) (2,643)
Acquisitions, net of cash acquired (13,199) (3,401) (3,990)
-------- -------- --------
Net cash utilized by investing activities (18,400) (8,274) (6,633)
-------- -------- --------
Financing Activities:
Borrowings under credit agreements 7,500 2,935 1,325
Payment of long-term debt and other obligations (2,458) (3,660) (2,880)
Repurchase of common stock (1,379) -- --
Proceeds from stock issuances 1,587 1,420 630
-------- -------- --------
Net cash provided by (utilized in) financing activities 5,250 695 (925)
-------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents (289) 43 32
-------- -------- --------
Increase (decrease) in cash and cash equivalents (10,472) 9,090 (191)
Cash and cash equivalents, beginning of year 18,055 8,965 9,156
-------- -------- --------
Cash and cash equivalents, end of year $ 7,583 $ 18,055 $ 8,965
======== ======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 687 $ 351 $ 445
======== ======== ========
Income taxes $ 3,395 $ 5,252 $ 4,370
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Description of business
Right Management Consultants, Inc. (the "Company") operations can be segregated
into two lines of business: Right Associates and People Tech Consulting ("People
Tech"). Through a worldwide network of Company and Affiliate offices, Right
Associates(R) develops and delivers career transition services. People Tech
provides organizational and career management consulting services, specializing
in change management, communication, strategy implementation, merger integration
and executive development. 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 majority-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.
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, recorded at the start of
performance of services, is deferred and recognized over the estimated average
period within which the contracts are essentially completed. All direct and
indirect costs are charged to expense in the period in which the obligations are
incurred.
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 typically 10% of
each Affiliate's gross billings and are recorded when the Affiliate bills its
customers for services.
6
<PAGE>
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Cash equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment is carried at cost, or allocated cost for companies
acquired in a purchase transaction. 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 computer equipment.
Leasehold improvements are depreciated using the straight-line method over the
shorter of the estimated useful life of the asset or the remaining term of the
lease.
Intangible assets
Intangible assets acquired in acquisitions consist of the following:
<TABLE>
<CAPTION>
Amortization
(Dollars in Thousands) Period
1997 1996 (Years)
---- ---- -------
<S> <C> <C> <C>
Trademarks $ 1,644 $1,644 5
Contact lists and Affiliate agreements 538 538 5
Covenants not to compete 1,118 1,118 5 to 10
Goodwill 38,239 23,949 15 to 40
------- -------
41,539 27,249
Less accumulated amortization 10,836 8,525
------- -------
$30,703 $18,724
======= =======
</TABLE>
Amortization of these intangible assets was $2,311,000, $1,868,000, and
$1,867,000 in 1997, 1996 and 1995, respectively.
Impairment of Long-Lived Assets
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of ", the Company is required to evaluate the potential impairment
of long-lived assets and certain intangible assets on a periodic basis. The
Company reviews the realizability of its long-lived assets and certain
intangible assets by analyzing the projected cash flows and profitability of the
acquired entities and adjusts the net book value of recorded assets when
necessary. No material adjustments have been recorded for each of the three
years in the period ended December 31, 1997.
7
<PAGE>
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Earnings per Share
The Company has adopted SFAS No. 128, "Earnings per Share," which supersedes
Accounting Principles Board Opinion ("APB") No. 15, "Earnings per Share," and
which is effective for all periods ending after December 15, 1997. SFAS 128
requires dual presentation of basic and diluted earnings per share ("EPS") for
complex capital structures on the face of the Statements of Income. Basic EPS is
computed by dividing net income by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution from the
exercise or conversion of securities into common stock. See Note K for further
disclosure.
Currency translation
The accounts of the international subsidiaries are translated in accordance with
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, and that the results of operations be
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 shareholders' equity. The effects of exchange rate
fluctuations in translating the results of operations are included in general
sales and administration expense for 1997, 1996 and 1995. There are no material
transaction gains or losses in the accompanying Consolidated Financial
Statements for each of the three years in the period ended December 31, 1997.
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.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," were issued in June
1997. SFAS 130 and SFAS 131 are effective for fiscal years beginning subsequent
to December 15, 1997, and, therefore, will be adopted by the Company on January
1, 1998. The Company does not expect the adoption of SFAS 130 or SFAS 131 to
result in any substantive changes in its disclosure.
Reclassifications
Certain amounts have been reclassified in the prior years' Consolidated
Financial Statements and Notes to the Consolidated Financial Statements to
conform with the 1997 presentation.
8
<PAGE>
NOTE B - RESTRUCTURING COSTS
During the first quarter 1997, the Company announced a corporate restructuring.
The restructuring charge of $630,000 ($380,000 or $0.06, net of taxes) was
primarily for severance payments related to reductions in employees and lease
termination costs for the closure of several small "satellite" offices with
limited future economic benefit to the Company.
NOTE C - ACQUISITIONS
Effective January 1, 1997, the Company acquired the assets and/or the
outstanding stock of six career transition firms and one search firm for a
combination of cash and future defined incentive payments. The six career
transition firms included Nelson, O'Connor & Associates (Phoenix, Arizona),
Corporate Resource Group (San Francisco, California), Cavendish Partners
(London, England) and the former St. Louis, Missouri, Knoxville, Tennessee, and
Richmond, Virginia Affiliates. The search firm acquired was Nelson, O'Connor &
Cox (Tucson, Arizona).
Effective April 1, 1997, the Company acquired the outstanding stock of another
career transition firm, Chapel Stowell, Inc. (Portland, Oregon).
Effective July 1, 1997, the Company acquired 51% of the outstanding shares of
the Australia based career management firm, Davidson & Associates, Pty., Ltd
("Davidson & Associates"). Davidson & Associates has operations in eleven
locations throughout Australia, New Zealand, Singapore and Hong Kong. The
purchase price of this acquisition approximated $6,935,000, including costs of
acquisition, 85% of which was paid in cash (approximately $5,946,000) and the
remaining 15% in shares of the Company's common stock (96,577 shares). The
Company borrowed $5,500,000 from its revolving credit facility in order to
complete this transaction. As a part of the purchase agreement, the minority
shareholders of Davidson & Associates have agreed to provide the Company with
options to acquire the remaining 49% of the outstanding shares of Davidson &
Associates, at fair value as defined, beginning on July 1, 2000. Additionally,
the minority shareholders of Davidson & Associates have the right to require the
Company to purchase in 10% annual increments the remaining 49% of the
outstanding shares of Davidson & Associates, at fair value as defined, beginning
on July 1, 2000.
Effective August 1, 1997, the Company acquired the business and certain assets
of a Minneapolis, Minnesota career management firm, Career Dynamics, Inc. The
purchase was funded through a borrowing of $2,000,000 under the Company's
revolving credit facility. The acquisition included future defined incentives
contingent upon the results of the operations in Minnesota subsequent to the
transaction.
Effective December 1, 1997, the Company acquired the business and certain assets
of a Houston, Texas career transition firm, Michael D. McKee & Associates. The
acquisition included future defined incentives contingent upon the results of
the operations in the Company's southwest region subsequent to the transaction.
9
<PAGE>
NOTE C - ACQUISITIONS (Continued)
The aggregate purchase price of these eleven acquisitions was approximately
$15,556,000, including costs of acquisition. The purchase price exceeded the
fair value of the net tangible assets acquired by approximately $14,847,000,
which will be amortized over a period of fifteen years.
Effective March 1, 1996, the Company acquired the outstanding stock of People
Tech headquartered in Toronto, Canada. Additionally during 1996, the Company
acquired the business, assets and/or the outstanding stock of two career
transition firms and one other organizational consulting firm.
The aggregate purchase price of these four acquisitions was approximately
$3,412,000, including costs of acquisition. The purchase price exceeded the fair
value of the net tangible assets acquired by approximately $3,653,000, which is
being amortized over a period of fifteen years. These acquisitions were made for
a combination of cash and non-cash consideration, including the assumption of
incomplete consulting contracts.
The assumption of incomplete contracts did not result in material revenue in any
of the three years in the period ended December 31, 1997.
The following represents the assets acquired and liabilities assumed to arrive
at net cash paid for acquisitions discussed above for each of the two years in
the period ended December 31, 1997:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 1996
<S> <C> <C>
Assets acquired:
Accounts receivable $ 2,875 $ 827
Prepaid expenses and other assets 423 716
Fixed assets 2,983 458
Intangible assets 14,847 3,653
------ -----
21,128 5,654
Liabilities acquired:
Accounts payable and accrued expenses 4,765 1,741
Assumption of incomplete contracts 807 512
------ -----
5,572 2,253
Cash acquired 1,368 ---
Equity issued 989 ---
------ -----
Net cash paid for acquisitions $13,199 $ 3,401
======= =======
</TABLE>
Each acquisition has been accounted as a purchase 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.
10
<PAGE>
NOTE C - ACQUISITIONS (Continued)
The unaudited pro forma results of operations for each of the two years in the
period ended December 31, 1997, reflecting the combined results of the Company
and the acquisitions detailed above as if the acquisitions had occurred at
January 1, 1996 are presented below.
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 1996
<S> <C> <C>
Revenues $ 137,380 $ 149,940
========== ==========
Income before income taxes $ 4,310 $ 15,372
========== ==========
Net income $ 1,882 $ 8,790
========== ==========
Diluted earnings per share $ 0.28 $ 1.32
========== ==========
</TABLE>
NOTE D - PROPERTY AND EQUIPMENT
(Dollars in Thousands)
1997 1996
Furniture and fixtures $21,313 $17,414
Computer equipment 4,264 2,557
Leasehold improvements 4,696 2,612
------- -------
30,273 22,583
Less accumulated depreciation 16,931 12,917
------- -------
$13,342 $ 9,666
======= =======
Depreciation expense was $4,183,000, $3,055,000, and $2,417,000 in 1997, 1996
and 1995, respectively.
NOTE E - DEBT AND OTHER OBLIGATIONS
On December 20, 1996, the Company signed a new Credit Agreement (the "Credit
Agreement") with its two primary lenders (the "Lenders") to increase its maximum
unsecured revolving line of credit to $40,000,000. The Credit Agreement became
effective December 23, 1996. The Credit Agreement replaces the previous
$10,000,000 Amended and Restated Revolving Credit and Term Loan Agreement (the
"Revolving Credit Agreement") executed with the Company's primary lender in June
1994 and amended various times thereafter, as well as a separate $5,000,000
unsecured line of credit with a second lender. During 1996, the Company used
$5,737,000 from the Credit Agreement to refinance all existing bank
indebtedness, of which the entire balance was outstanding at December 31, 1996.
The Credit Agreement has a three year maturity. Subsequent to the first
anniversary, and annually thereafter, the Company has the ability to extend the
Credit Agreement for an additional year upon Lenders' approval. The Company may
borrow, repay and re-borrow during the term of the Credit Agreement, with any
balance due at maturity. Interest rates are tiered at LIBOR plus a margin
contingent upon certain financial ratios of the Company. The Company also has
the option to borrow at a base rate equal to the lesser of the Lenders' Prime
Rate less 1/4% or the Federal Funds Effective Rate plus 1%.
11
<PAGE>
NOTE E - DEBT AND OTHER OBLIGATIONS (Continued)
In connection with the 1997 acquisitions of Davidson & Associates and Career
Dynamics, Inc. (Note C), the Company utilized $7,500,000 from the Credit
Agreement.
In order to reduce the impact of changes in interest rates on a portion of the
Company's floating rate debt under the Credit Agreement, the Company has entered
into three interest rate swap agreements during 1997 with an aggregate notional
principal at December 31, 1997 of $9,708,000 and quarterly payments scheduled
over three to five years. The Company's interest rates under these interest rate
swaps range from 6.70% to 7.10%, which includes a contingent margin of 1% at
December 31, 1997.
The Company uses interest rate swaps to reduce exposure to adverse fluctuations
in interest rates. While these hedging instruments are subject to fluctuations
in value, such fluctuations are offset by the change in value of the underlying
exposures being hedged. The Company is not a party to leveraged derivatives and
does not hold or issue financial instruments for speculative purposes. The net
cash paid or received on interest rate swap agreements is recognized as an
adjustment to interest expense. The impact of the above interest rate swap
agreements on interest expense has been immaterial to date.
At December 31, 1997, the Company had an additional $1,900,000 outstanding at
the base rate detailed in the Credit Agreement.
In connection with the 1996 acquisition of People Tech (Note C), the Company
utilized 4,000,000 Canadian dollars (or approximately $2,935,000) from the
Revolving Credit Agreement. This entire amount was subsequently repaid from the
proceeds of the Credit Agreement.
Under the Credit Agreement, 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, 1997, the Company is in compliance with
all such covenants.
Long-term debt and other obligations consist of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
1997 1996
<S> <C> <C>
Floating rate borrowings under the Credit Agreement, due December 23, 1999, with $ 1,900 $ 5,737
quarterly interest payments, bearing interest at 7.07% and 6.53% at 12/31/97 and
12/31/96, respectively
Borrowings under the Credit Agreement tied to interest rate swaps with quarterly 9,708 ---
principal and interest payments from 1997 to 2002, bearing interest at 6.70% to 7.10%
Capitalized lease obligations with interest at 8.7% per annum 442 ---
Obligations payable to third parties in connection with acquisitions,
non-interest-bearing and discounted at 7.5%-10% per annum, due through
1998, estimated and contingent on future operating results of regions
where acquired businesses are operating 668 2,178
------- --------
12,718 7,915
Less current portion 3,943 1,011
------- --------
$ 8,775 $ 6,904
======= ========
</TABLE>
12
<PAGE>
NOTE E - DEBT AND OTHER OBLIGATIONS (Continued)
Aggregate maturities on long-term debt and other obligations for the years
subsequent to December 31, 1997 are as follows:
(Dollars in Thousands)
Year Ending December 31, Amount
1998 $3,943
1999 5,401
2000 1,799
2001 900
2002 675
-------
$12,718
=======
NOTE F - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $ 1,388 $ 5,429 $ 4,107
State 561 861 852
Foreign 570 479 551
------- ------- -------
2,519 6,769 5,510
------- ------- -------
Deferred:
Federal (226) (290) (85)
State 60 (59) (8)
Foreign 51 (12) --
------- ------- -------
(115) (361) (93)
------- ------- -------
Utilization and benefit of foreign operating
loss carryforwards (203) -- (321)
------- ------- -------
2,201 6,408 5,096
Provision for valuation allowance (192) 192 --
------- ------- -------
$ 2,009 $ 6,600 $ 5,096
======= ======= =======
</TABLE>
During the fourth quarter 1997, the Company recorded an income tax charge of
$190,000 related to the expected results of pending tax audits.
13
<PAGE>
NOTE F - INCOME TAXES (Continued)
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. The reconciliation of these differences is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
U.S. Federal income tax rate 34% 34% 34%
Provision for tax audits 4 -- --
State income taxes, net of federal tax benefit 4 4 4
Nondeductible expenses 4 1 1
Foreign earnings not subject to U.S. Federal 1 1 1
income tax, net of foreign taxes
Deferred tax valuation allowance (4) 1 --
Other 2 -- --
--- --- ---
45% 41% 40%
=== === ===
</TABLE>
Income before income taxes is comprised of domestic and foreign components,
respectively, as follows: 1997-- $1,565,000 and $2,855,000; 1996--$14,184,000
and $2,091,000 and 1995--$11,449,000 and $1,466,000.
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
$4,167,000 and $3,034,000 at December 31, 1997 and 1996, 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.
14
<PAGE>
NOTE F - INCOME TAXES (Continued)
The deferred tax asset as of December 31, 1997 and 1996 is comprised of the
following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 1996
<S> <C> <C>
Allowance for doubtful accounts $ 245 $ 209
Accruals not currently deductible for income taxes 331 193
Deferred compensation 618 726
Depreciation and amortization 1,013 724
Tax benefit of foreign net operating losses 293 313
Other -- 17
------- -------
2,500 2,182
Valuation reserve -- (192)
------- -------
Net deferred tax asset $ 2,500 $ 1,990
======= =======
</TABLE>
At December 31, 1996, management determined it was prudent to record a full
valuation reserve against the operating loss incurred at People Tech, given the
relative lack of history at People Tech for which future estimates of income can
be made. Based on the profitability of People Tech during 1997 and the
expectation that such profitability will continue in subsequent years,
management believes it is more likely than not to realize the net deferred tax
asset and accordingly the valuation reserve has been eliminated.
NOTE G - BENEFIT AND COMPENSATION AGREEMENTS
The Company has a non-qualified supplemental executive retirement plan (the
"Plan") for its Founding Chairman. The Plan is designed to provide retirement
income based on past compensation, reduced by other retirement sources.
Effective January 1, 1997, the Founding Chairman began collecting benefits in
accordance with the Plan.
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 $1,151,000 and $1,184,000 for 1997 and
1996, respectively, using a discount rate of 7.25%. Since the Plan is not funded
by the Company, the recorded liability equals the present value of the
accumulated benefit obligation.
The Company has non-qualified supplemental executive retirement plans for its
Chief Executive Officer and President 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% at both November 30, 1997 and 1996). The account balance is payable
as a life annuity in equal monthly installments with interest on the unpaid
balance upon termination of service with the Company. The Chief Executive
Officer and President's interest in the plans vests at the rate of 10% and 20%
per year, respectively, which began in 1993 and 1996, respectively.
15
<PAGE>
NOTE G - BENEFIT AND COMPENSATION AGREEMENTS (Continued)
The Company also maintains life insurance policies on the lives of key
executives, naming the Company as the beneficiary. The cash surrender value of
these policies is included in the Other non-current assets section of the
Consolidated Balance Sheets.
The Company also maintains employment agreements and incentive compensation
agreements with certain key management employees. The agreements typically
result from the Company's acquisitions of outside firms. 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 $3,193,000 in 1998, $2,056,000
in 1999, $1,115,000 in 2000, $45,000 in 2001 and $35,000 in 2002.
NOTE H - 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 1996 and 1995, 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%. The Company
made no additional contribution for 1997 based on the Company's failure to meet
internal targets. Employee contributions are generally limited to 10% of their
compensation subject to Internal Revenue Code limitations. Company contributions
were approximately $469,000, $704,000, and $686,000 for 1997, 1996 and 1995,
respectively.
In addition, the Company maintains a non-qualified 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 (6% at both November 30, 1997 and 1996). The
deferred amounts will be paid from the general assets of the Company and are
included in deferred compensation as of December 31, 1997 and 1996.
16
<PAGE>
NOTE I - LEASE OBLIGATIONS
The Company leases office space and equipment at various locations and accounts
for these obligations as operating leases. Rentals relating to these leases are
recorded on a straight-line basis. Rental expense approximated $14,350,000,
$13,000,000 and $11,998,000 in 1997, 1996, and 1995, 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 non-cancelable lease
terms in excess of one year as of December 31, 1997:
(Dollars in Thousands)
Year Ending December 31, Amount
1998 $11,076
1999 9,582
2000 8,289
2001 6,985
2002 3,967
2003 and subsequent years 2,838
NOTE J - SHAREHOLDERS' EQUITY
Stock Splits
Effective November 10, 1995, the Company's Common Stock split into three shares
for each two shares outstanding. Additionally, effective July 26, 1996, the
Company's Common Stock split a second time into three shares for each two shares
outstanding. The stated par value per share of Common Stock was not changed for
both stock splits from its existing amount of $0.01 per share. All share and per
share amounts referred to in the financial statements and notes thereto have
been restated to reflect both stock splits, including rounding up for fractional
shares, where appropriate.
Stock Option Plans
The Company has a 1986 Stock Option Plan (the "1986 Plan") under which 968,000
shares of Common Stock are reserved for issuance upon the exercise of incentive
stock options, stock appreciation rights or non-qualified 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. Effective September 8, 1996, no further stock
options can be granted under the 1986 Plan.
The Company also has a 1993 Stock Incentive Plan, as amended in 1996, with
2,475,000 shares of Common Stock reserved for issuance upon the exercise of
incentive stock options or non-qualified stock options that may be granted to
employees. Outstanding options granted under this plan have ten year terms and
are exercisable, cumulatively, in three equal annual installments, beginning one
year from the date of grant. At December 31, 1997, 926,553 shares were available
for issuance under this plan.
17
<PAGE>
NOTE J - SHAREHOLDERS' EQUITY (Continued)
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 675,000 shares of the Company's Common Stock to certain officers
and key employees. 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 1996 and 1995, 29,250 and 44,550
shares of restricted stock were awarded, respectively. Due to the Company's
decreasing stock price during 1997 and the forfeiture of certain awards, total
compensation expense related to restricted stock grants included within general
sales and administration expenses was reduced by approximately $633,000 during
1997. Approximately $658,000 and $230,000 of compensation expense related to
these shares was charged to general sales and administration expenses in 1996
and 1995, respectively.
The Company also has a Directors' Stock Option Plan, under which 225,000 shares
of Common Stock are reserved for issuance upon the exercise of incentive stock
options or non-qualified stock options that may be granted to non-employee
Directors of the Board of Directors. Outstanding options granted under this plan
have five year terms and are exercisable, cumulatively, in three equal annual
installments, beginning one year from the date of grant. At December 31, 1997,
171,000 option shares were available for issuance under this plan.
The Company has elected to follow APB No. 25, "Accounting for Stock Issued to
Employees" in accounting for its stock options. Under APB No. 25, no
compensation expense is recognized because the exercise price of the Company's
stock options equals the market price of the underlying stock on the date of the
grant. Had compensation cost for these plans been determined with SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share for 1997 and 1996 would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net income - as reported $2,073,000 $9,675,000 $7,819,000
Net income - pro forma $108,000 $8,389,000 $7,638,000
Basic EPS - as reported $0.31 $1.55 $1.31
Basic EPS - pro forma $0.02 $1.34 $1.28
Diluted EPS - as reported $0.31 $1.45 $1.24
Diluted EPS - pro forma $0.02 $1.26 $1.21
</TABLE>
The fair value of the options were estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995, respectively: risk-free
interest rates of 6.4% for all years; no dividend yield for all years; expected
volatility of 70% for all years; and a weighted average expected life of the
option of 7 years. Under SFAS No. 123, total compensation expense, net of tax
benefit, approximated $1,965,000, $1,286,000, $181,000 in 1997, 1996, and 1995,
respectively.
18
<PAGE>
NOTE J - SHAREHOLDERS' EQUITY (Continued)
Because the accounting under SFAS No. 123 has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
A summary of the status of the Company's stock option plans at December 31,
1997, 1996 and 1995 and changes during the years then ended is presented in the
table and narrative below:
<TABLE>
<CAPTION>
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,238,295 $10.92 1,274,534 $7.89 1,033,577 $5.77
Granted 241,788 17.31 311,300 16.77 390,000 12.82
Exercised (236,095) 5.08 (316,039) 4.23 (108,918) 5.78
Canceled (43,750) 13.08 (31,500) 15.29 (40,125) 6.82
--------- ------ --------- ------ --------- -----
Outstanding at end of year 1,200,238 $13.26 1,238,295 $10.92 1,274,534 $7.89
Exercisable at end of year 672,492 $10.93 610,247 $7.63 671,939 $4.63
Weighted average fair value $12.10 $11.21 $9.24
of options granted
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$6.89 to $24.33. The weighted average remaining contractual life of these
options is approximately 7.75 years.
Employee Stock Purchase Plan
On May 9, 1996, the Company Shareholders approved the creation of the Company's
1996 Employee Stock Purchase Plan (the "ESPP"). Effective July 1, 1996, 150,000
shares were reserved for issuance under the ESPP. The ESPP permits employees to
purchase Company Common Stock at 85% of the average market price on the last day
of the applicable quarterly period. All Company employees, except executive
employees, are eligible to participate in the ESPP. During 1996 and 1997, 4,368
and 37,859 shares, respectively, were purchased through the ESPP.
Repurchase of Common Stock
In March 1997, the Board of Directors (the "Board") approved a stock repurchase
program under which the Company is authorized to repurchase up to 10% of its
currently outstanding common stock. Any shares repurchased will be held as
treasury shares and be available to the Company for use in various benefit plans
and, when authorized by the Board, for other general corporate purposes. The
Board has authorized Company management to pursue the repurchase program in open
market transactions from time-to-time, depending upon market conditions and
other factors.
During 1997, the Company repurchased 127,500 shares of common stock at an
aggregate purchase price of $1,379,000.
19
<PAGE>
NOTE K - EARNINGS PER SHARE
In 1997, the Company adopted SFAS. No. 128, "Earnings per Share". The
calculations of earnings per share ("EPS") under SFAS No. 128 are detailed
below.
For the year ended 12/31/97
Income Shares EPS
Basic EPS:
Net income $2,073,000 6,596,000 $0.31
=====
Impact of options -- 129,000
---------- ---------
Diluted EPS:
Net income $2,073,000 6,725,000 $0.31
========== ========= =====
For the year ended 12/31/96
Income Shares EPS
Basic EPS:
Net income $9,675,000 6,252,000 $1.55
=====
Impact of options -- 411,000
---------- ---------
Diluted EPS:
Net income $9,675,000 6,663,000 $1.45
========== ========= =====
For the year ended 12/31/95
Income Shares EPS
Basic EPS:
Net income $7,819,000 5,984,000 $1.31
=====
Impact of options -- 306,000
---------- ---------
Diluted EPS:
Net income $7,819,000 6,290,000 $1.24
========== ========= =====
For the year ended December 31, 1997, outstanding options to purchase 785,964
shares of Company Common Stock at $12.75 to $24.33 were excluded from the
computation of diluted EPS, as the options' exercise price was greater than the
average market price of the Common Stock.
As a result of the Company's adoption of SFAS No. 128, the Company's reported
EPS for 1996 and 1995 were restated. The effect of this accounting change on
previously reported EPS data was as follows:
Per Share Amounts: 1996 1995
Primary EPS as reported $1.45 $1.24
Effect of SFAS No. 128 0.10 0.07
----- -----
Basic EPS as restated $1.55 $1.31
===== =====
Fully diluted EPS as reported $1.44 $1.22
Effect of SFAS No. 128 0.01 0.02
----- -----
Diluted EPS as restated $1.45 $1.24
===== =====
20
<PAGE>
NOTE L - 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, 1997, are as follows
(See Note A for discussion relating to currency translation and Note F for
discussion relating to income taxes):
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 United States Canada Europe Asia-Pacific Consolidated
<S> <C> <C> <C> <C> <C>
Identifiable assets $63,881 $7,006 $5,600 $5,217 $81,704
======== ======== ======== ======= ========
Revenue 97,358 9,784 11,475 7,169 125,786
======== ======== ======== ======= ========
Operating income (1) 1,720 1,138 598 1,119 4,575
======== ======== ======== ======= ========
Depreciation and amortization 5,500 245 444 305 6,494
======== ======== ======== ======= ========
Capital expenditures 3,893 126 755 427 5,201
======== ======== ======== ======= ========
1996 United States Canada Europe Asia-Pacific Consolidated
Identifiable assets $60,414 $7,155 $6,366 $ -- $73,935
======== ======== ======== ======= ========
Revenue 105,028 9,167 11,074 -- 125,269
======== ======== ======== ======= ========
Operating income (1) 14,115 1,142 982 -- 16,239
======== ======== ======== ======= ========
Depreciation and amortization 4,038 475 410 -- 4,923
======== ======== ======== ======= ========
Capital expenditures 4,707 80 86 -- 4,873
======== ======== ======== ======= ========
1995 United States Canada Europe Asia-Pacific Consolidated
Identifiable assets $51,530 $2,181 $6,520 $ -- $60,231
======== ======== ======== ======= ========
Revenue 97,940 7,078 8,987 -- 114,005
======== ======== ======== ======= ========
Operating income (loss) (1) 11,874 1,987 (517) -- 13,344
======== ======== ======== ======= ========
Depreciation and amortization 3,788 173 323 -- 4,284
======== ======== ======== ======= ========
Capital expenditures 2,393 96 154 -- 2,643
======== ======== ======== ======= ========
<FN>
(1) The operating income reported for the United States segment includes total
general sales and administration expense reported on the Consolidated Statements
of Income.
</FN>
</TABLE>
21
<PAGE>
NOTE M - SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company acquired the assets of three
consulting firms for a combination of cash and future defined incentive
payments. The firms included Manus, a Stamford, Connecticut consulting firm; The
Atlanta Consulting Group, of Atlanta, Georgia; and Teams, Inc. ("Teams"), of
Tempe, Arizona. Definitive agreements, effective January 1, 1998, have been
completed with Manus and The Atlanta Consulting Group and a Letter of Intent has
been executed with Teams subject to definitive agreements expected to be
completed over the next 60 days.
The transaction with Teams will be a joint venture, with the Company purchasing
a 51% interest. As a part of the purchase agreement, the minority shareholders
of Teams have agreed to provide the Company with options to acquire the
remaining 49% of the outstanding interest of Teams beginning on April 1, 2001.
Additionally, the minority shareholders of Teams have the right to require the
Company to purchase the remaining 49% of the outstanding interest of Teams
beginning on April 1, 2001.
The purchase price for these acquisitions totaled approximately $6,000,000,
including contingent payments and costs of acquisition, and will be accounted
for using the purchase method. The Company has funded these acquisitions through
borrowings under the Credit Agreement.
In connection with the acquisition of Manus, the Company entered into another
interest rate swap with a notional principal of $5,500,000, which constitutes
the purchase of this acquisition and the remaining floating rate debt under the
Credit Agreement.
22
<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. Certain amounts have been reclassified in the 1996 and 1995
Consolidated Statements of Income to conform with the 1997 presentation. 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,
1997 1996 1995
<S> <C> <C> <C>
Company office revenue $122,281 $120,679 $109,741
Company office expenses 107,217 95,950 88,425
--------- --------- ---------
Company office margin 15,064 24,729 21,316
Affiliate royalties 3,505 4,590 4,264
General sales and administration (13,364) (13,080) (12,236)
Restructuring costs (Note B) (630) -- --
Interest income (expense), net (155) 36 (429)
--------- --------- ---------
Income before income taxes $4,420 $16,275 $12,915
========= ========= =========
</TABLE>
1997 Compared to 1996
For the year ended December 31, 1997, revenue generated by Company offices
increased by 1%, or $1,602,000 over 1996. This increase is due to $15,662,000 in
incremental revenues from acquisitions, offset by a 12% same office revenue
decrease. The year to date 1997 incremental revenues from acquisitions include
the results of the entities detailed in Note C to the Consolidated Financial
Statements, as well as two additional months revenue from the People Tech
acquisition consummated effective March 1, 1996. The same office revenue
decrease is due to a general slow down in both the North American and European
career transition markets associated with the continued strength of the U.S.
economy. Additionally, the Company experienced compression in the length of
career transition programs provided which negatively impacted office revenues by
lowering average fees by program.
The Company's consulting line of business reported total revenues of
$11,100,000, which represents a 16% increase over 1996. The Company is committed
to the growth of this line of business as evident in the three acquisitions
announced subsequent to December 31, 1997 (see Note M to the Consolidated
Financial Statements).
For the year ended December 31, 1997, Affiliate royalties decreased 24%, or
$1,085,000 from 1996. The decrease is attributable to the aforementioned decline
in the North American career transition market, as well as the acquisitions of
three former Affiliates in the first quarter 1997 (see Note C to the
Consolidated Financial Statements). Revenue from the acquisition of the three
former Affiliates is reflected as Company office revenue subsequent to the
acquisition. On a same office basis, Affiliate royalties decreased 19% or
$816,000 from 1996.
23
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
For the year ended December 31, 1997, total Company office expenses, exclusive
of formal restructuring costs (see Note B to the Consolidated Financial
Statements) increased 12% or $11,267,000 over 1996. This increase is due to
approximately $12,959,000 in incremental costs from acquisitions, as well as
approximately $1,150,000 in additional office level charges for severance, lease
reductions and strategic planning during the fourth quarter of 1997. Exclusive
of costs from acquisitions, formal restructuring costs and the one time charges
during the fourth quarter, the Company's same office expenses decreased by
approximately $2,842,000 from 1996 due to general cost containment measures
implemented by the Company necessary to align the cost infrastructure with the
decreased same office revenues.
Aggregate Company office margins, exclusive of formal restructuring costs, were
12% and 20% for 1997 and 1996, respectively. The decrease in margins is
attributable primarily to the previously mentioned decline in career transition
revenues and program compression, partly offset by improved margins in the
consulting line of business and favorable results for the Company's Davidson &
Associates acquisition (see Note C to the Consolidated Financial Statements).
For the year ended December 31, 1997, general sales and administration expenses
increased by 2% or $284,000 over 1996. This increase is due primarily to the
fourth quarter 1997 costs associated with the Company's updated strategic plan,
amortization costs associated with the Company's eleven acquisitions during 1997
(see Note C to the Consolidated Financial Statements), and the additions of key
management personnel during the latter half of 1996 and throughout 1997. Due to
the Company's decreasing stock price during 1997 and the forfeiture of certain
awards of common stock, total compensation expense related to restricted stock
grants included within general sales and administration expenses was reduced by
approximately $633,000 for 1997. For the year ended December 31, 1997, general
sales and administration expenses as a percentage of total revenues were
approximately 11% versus 10% for 1996.
For the year ended December 31, 1997, the Company's effective tax rate was
approximately 45% versus 41% for 1996. The increase in the effective tax rate is
due primarily to the impact of an income tax charge of approximately $190,000
related to the expected results of pending tax audits (see Note F to the
Consolidated Financial Statements).
24
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
1996 Compared to 1995
For the year ended December 31, 1996, revenue generated by Company offices
increased 10%, or $10,938,000 over 1995. This increase is attributable to
revenue growth in existing Company offices, coupled with the additional full
year revenues from the LM&P and Providence acquisitions, and partial year
revenues from the People Tech acquisition. Incremental revenue generated through
these acquisitions totaled $6,158,000 or 56% of the total revenue increase. The
remaining increase was provided by same office revenue growth of approximately
4%.
For the year ended December 31, 1996, Affiliate royalties increased 8%, or
$326,000 over 1995. This increase is attributable to revenue growth in existing
Affiliate offices, offset by reduced Affiliate royalties from the acquisition of
the Providence Affiliate on October 1, 1995. Revenue from Providence is
reflected as Company office revenue subsequent to the acquisition. On a same
office basis, Affiliate royalties increased 13% in 1996 due primarily to
significant billings from our Affiliates in the North Central region of the
United States.
For the year ended December 31, 1996, Company office expenses in the aggregate
increased 9%, or $7,525,000 over 1995. This dollar increase is primarily due to
the incremental costs from the LM&P, Providence and People Tech acquisitions, in
addition to growth in existing Company offices. The acquisitions accounted for
$5,376,000 or 71% of the total increase. The remainder of the increase is a
function of revenue growth in existing Company offices. Despite the cost
increase, office operating margins improved to 20% in 1996 from 19% in 1995.
This improvement is a reflection of higher operating efficiencies in the career
transition business, enhanced pricing, and strong European results, partly
offset by a loss in the consulting business.
For the year ended December 31, 1996, general sales and administration expense
increased 7%, or $844,000 over 1995. The increase is due primarily to the
Company's continued investments in technology and the additional costs of the
1996 and 1995 restricted stock grants attributable to the Company's stock price
increase. Despite the increase in 1996, general sales and administration
expenses as a percentage of total revenues decreased to 10% from 11% in 1995.
For the year ended December 31, 1996, income before income taxes increased 26%,
or $3,360,000 over 1995. The increase is attributable to the combination of
greater Company office revenue and Affiliate royalties, improved office
operating margins and reduced general sales and administration expenses as
compared to Company growth.
For the year ended December 31, 1996, the Company's effective tax rate was
approximately 41% versus 40% for 1995.
25
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Capital Resources and Liquidity
At December 31, 1997 and 1996, the Company had cash and cash equivalents of
$7,583,000 and $18,055,000, respectively. The significant decrease in cash and
cash equivalents is the result of lower net income, as well as payments made for
acquisitions and 1996 incentive compensation (see Note C to the Consolidated
Financial Statements). At December 31, 1997, the Company's working capital
decreased to $15,491,000 from $25,342,000 at December 31, 1996.
Net cash utilized by investing activities amounted to $18,400,000 and $8,274,000
for 1997 and 1996, respectively. The Company continues to purchase equipment and
technology to meet the needs of its expanding operations and to enhance its
operating efficiency. During 1997, the Company acquired eleven career management
firms for a combination of cash and future defined incentive payments (see Note
C to the Consolidated Financial Statements). The $13,199,000 net cash paid for
acquisitions on the Consolidated Statement of Cash Flows is net of $1,368,000 of
cash acquired from acquisitions. Additionally, in connection with the Davidson &
Associates acquisition (see Note C to the Consolidated Financial Statements),
the net cash paid for acquisitions on the Consolidated Statement of Cash Flows
excludes the value of the issuance of 96,577 shares which is considered a
non-cash investing activity.
During 1996, the Company acquired the business, assets, and/or outstanding stock
of four career management consulting firms, including People Tech, for a
combination of cash and non-cash items, including the assumption of incomplete
consulting contracts, future defined incentives and other considerations.
Additionally during 1996, the Company made a significant investment in
technology with the implementation of a new financial system.
Net cash provided by financing activities amounted to $5,250,000 and $695,000 in
1997 and 1996, respectively. The net cash provided by financing activities for
1997 was the result of $7,500,000 in borrowings from the Company's revolving
credit facility in order to complete two acquisitions (see Note C to the
Consolidated Financial Statements) and proceeds from the issuance of stock,
partly offset by repayments on the Company's borrowings and defined incentives
for acquisitions made in previous years, as well as the repurchase of common
stock (see Note J to the Consolidated Financial Statements).
26
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In addition to cash flow provided by operations, the Company has borrowing
facilities to provide for increased working capital needs as well as to provide
for future acquisition opportunities. During 1996, the Company increased its
borrowing capacity to $40,000,000 from the previous $15,000,000 level through
the execution of its Credit Agreement with its two primary lenders (See Note E
to the Consolidated Financial Statements). The Company had approximately
$28,392,000 and $34,263,000 available under the Credit Agreement at December 31,
1997 and 1996, respectively. Subsequent to December 31, 1997, the Company
announced the acquisition of three consulting firms for a combination of cash
and future defined incentive payments (see Note M to the Consolidated Financial
Statements). The Company will fund these acquisitions through borrowings under
the Credit Agreement. The Company plans to utilize the Credit Agreement in
future periods to assist in the financing of acquisitions as they arise, and for
other general corporate purposes.
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.
27
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Year 2000
The Company has completed a preliminary evaluation of the potential impact of
the year 2000 and is not able to reasonably quantify the anticipated costs at
this time. However, the Company clearly expects costs to be incurred addressing
the year 2000 issue, but does not expect these costs to have a material impact
on its business, operations, or its financial condition.
Forward-Looking Statements
Statements included in this Report on Form 10-K, including within this
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are not historical in nature, are intended to be, and hereby
are identified as "forward looking statements" for purposes of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers that forward looking statements including without limitation
those relating to the Company's future business prospects, revenues, working
capital, liquidity, capital needs, interest costs and income are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward looking statements due to several
important factors hereafter identified, among others, as well as other risks and
uncertainties identified from time to time in the Company's reports filed with
the Securities and Exchange Commission. Readers of this Report are cautioned not
to place undue reliance upon these forward looking statements, which speak only
as of the date hereof. The Company undertakes no obligation to publicly release
any revisions to these forward looking statements or reflect events or
circumstances after the date hereof.
Among the factors that create risk and uncertainty are (i) government regulation
of the Company's Affiliates; (ii) the Company's ability to maintain good
relationships with its remaining Affiliates; (iii) competition within the highly
fragmented career transition and human resource consulting services industries;
(iv) the dependence on key management or operating personnel within the Company
or an Affiliate; (v) economic conditions on a local, regional, national and
international basis, which affect the demand for the Company's services; for
example, a stronger economy can lead to easier and more rapid job change and
reentry, which can reduce the demand for the Company's services or compress the
length of the services provided, thereby negatively impacting prices. Weaker
economic conditions can also lead to reluctance on outside companies' part to
incur the expenditure associated with the Company's services.
28
<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 meets 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
29
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
<TABLE>
<CAPTION>
1997 DIRECTORS AND EXECUTIVE OFFICERS
<S> <C>
Richard J. Pinola Chairman of the Board of Directors and Chief Executive
Officer
Frank P. Louchheim Founding Chairman and Director
Joseph T. Smith President, Chief Operating Officer and Director
Larry A. Evans Executive Vice President and Director
Dr. Marti D. Smye President of People Tech Consulting, Inc. and Director
Frederick Davidson President of Davidson & Associates and Director
DIRECTORS
John R. Bourbeau President of Right Associates(R) of the Great Lakes
Region, an Affiliate of the Company
Raymond B. Langton President and Chief Executive
Officer of SKM Applied Technology Partners
Rebecca J. Maddox President and Co-founder of Capital Rose, Inc.
Catherine Y. Selleck Business Consultant
OTHER EXECUTIVE OFFICERS
John J. Gavin Executive Vice President
G. Lee Bohs Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Peter J. Doris Executive Vice President
Nancy N. Geffner Executive Vice President - New York Group
Manville D. Smith Executive Vice President - Southern Group
Terry W. Szwec Executive Vice President - Canadian Group
Gilbert A. Wetzel Executive Vice President - Eastern Group
Joan Strewler Executive Vice President - North Central Group
Timothy D. Dorman Executive Vice President - Western Group
</TABLE>
Corporate Headquarters Independent Public Accountants
Right Management Consultants, Inc. Arthur Andersen LLP
1818 Market Street Philadelphia, Pennsylvania
33rd Floor
Philadelphia, Pennsylvania 19103
General Counsel
Fox, Rothschild, O'Brien & Frankel
Philadelphia, Pennsylvania
30
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
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.
People Tech Consulting Corporation
People Tech Consulting, Ltd.
ProTransition, Inc.
Chapel Stowell, Inc.
Cavendish Partners Ltd.
Right D & A Pty. Ltd. (51% ownership)
Service Marks and Right Associates, THinc, Partners in Managing Change,
Trade Marks The Right Fit, The Right Way, Key Executive Service
and Zeroing-in-Process (Z.I.P.) are registered
Service Marks of Right Management Consultants, Inc.
People Tech is a registered Service Mark of a wholly
owned subsidiary.
The Right Report is a registered Trademark of Right
Management Consultants, Inc.
Rightrack and the Globe Design are Service Marks of
Right Management Consultants, Inc.
31
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
Right Management Consultants, Inc.
Common Stock Listed on NASDAQ Stock Market
Symbol RMCI
Common Stock Data
1997 High Low
First Quarter 23 1/2 8 3/4
Second Quarter 11 3/4 9 5/8
Third Quarter 11 1/2 9 1/4
Fourth Quarter 13 1/2 9 1/8
1996 High Low
First Quarter 20 5/8 15
Second Quarter 25 20
Third Quarter 27 1/2 19 1/4
Fourth Quarter 24 1/2 18 1/2
The above prices reflect interdealer prices, without retail markup, markdown or
commission and may not necessarily represent actual transactions.
As of March 27, 1998, there were 159 record holders and approximately 2,361
beneficial owners 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.
Registrar and StockTrans, Inc.
Transfer Agent Ardmore, Pennsylvania
Availability of A copy of the Company's Annual Report
10-K Annual Report to the Securities and Exchange
Commission on Form 10-K may be obtained by
writing to:
Paul J. Straub
Manager of Financial Reporting
Right Management Consultants, Inc.
1818 Market Street
Thirty-third Floor
Philadelphia, PA 19103
32
<PAGE>
WORLD
HEADQUARTERS
Philadelphia, PA
UNITED STATES AND PUERTO RICO
Alabama
Birmingham
Alaska
Anchorage
Arizona
Phoenix
Tucson
California
Cupertino
Irvine
Los Angeles
Pasadena
Sacramento
San Bernardino
San Diego
San Francisco
Walnut Creek
Woodland Hills
Colorado
Colorado Springs
Denver
Connecticut
Hartford
Stamford
Delaware
Wilmington
District of Columbia
Washington
Florida
Boca Raton
Fort Lauderdale
Jacksonville
Miami
Orlando
Palm Beach
Saint Petersburg
Tampa
Georgia
Atlanta
Illinois
Chicago
Northbrook
Oak Brook
Indiana
Indianapolis
Iowa
Des Moines
Kansas
Wichita
Kentucky
Lexington
Louisville
Louisiana
New Orleans
Maryland
Baltimore
Hunt Valley
Massachusetts
Boston
Burlington
Michigan
Detroit
Grand Rapids
Kalamazoo
Lansing
Midland
Minnesota
Edina
Minneapolis
Missouri
Kansas City
St. Louis
Nebraska
Omaha
Nevada
Las Vegas
New Jersey
Parsippany
Princeton
Upper Saddle River
New Mexico
Albuquerque
New York
Buffalo
Melville
New York City
Westchester
North Carolina
Charlotte
Greensboro
Raleigh
Winston-Salem
Ohio
Cincinnati
Cleveland
Columbus
Dayton
Toledo
Oklahoma
Oklahoma City
Tulsa
Oregon
Portland
Pennsylvania
Allentown
Erie
Lancaster
Malvern
Philadelphia
Pittsburgh
Reading
Puerto Rico
San Juan
Rhode Island
Providence
South Carolina
Greenville
Tennessee
Kingsport
Knoxville
Memphis
Nashville
Texas
Austin
Dallas
Fort Worth
Houston
San Antonio
Utah
Salt Lake City
Virginia
Fairfax
Richmond
Roanoke
Vienna
Virginia Beach
Washington
Seattle
West Virginia
Charleston
Wisconsin
Madison
Mequon
Milwaukee
CANADA
Alberta
Calgary
Edmonton
British Columbia
Vancouver
Manitoba
Winnipeg
New Brunswick
Moncton
St. John
New Foundland
St. John's
Nova Scotia
Halifax
Ontario
Kingston
London
Mississauga
Ottawa
Richmond Hill
Toronto
Quebec
Montreal
Quebec City
Saskatchewan
Saskatoon
<PAGE>
EUROPE
Belgium
Antwerp
Burssels
England
London
Swindon
France
Paris
Scotland
Aberdeen
Glasgow
Switzerland
Geneva
Asia/Pacific
Australia
Adelaide
Brisbane
Canberra
Melbourne
Perth
Sydney
China
Hong Kong
New Zealand
Auckland
Singapore
EXHIBIT 21 - SUBSIDIARIES OF THE COMPANY
<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
13. People Tech Consulting Corporation, a Delaware corporation
14. People Tech Consulting, Ltd., a Canadian corporation
15. Pro Transition, Inc., a Canadian corporation
16. Chapel Stowell, Inc., an Oregon corporation
17. Cavendish Partners Ltd., a U.K. corporation
18. Right D & A Pty. Ltd. (51% ownership), an Australian corporation
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Right Management Consultants, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K into the Company's previously filed
Registration Statements No. 333-06211, File No. 333-07975, File No. 33-58698,
File No. 33-62997, and File No. 33-62999.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
March 26, 1998
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