<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year ended December 31, 1993Commission File Number 0-21886
BARRETT BUSINESS SERVICES, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0812977
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
4724 S.W. Macadam Avenue 97201
Portland, Oregon (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (503) 220-0988
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
x No ____
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. X
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
$22,284,768 at February 25, 1994
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
Class Outstanding at February 25, 1994
Common Stock, Par Value $.01 Per Share 3,164,000 Shares
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference
and the Part of the Form 10-K into which the document is incorporated:
Portions of the registrant's definitive proxy statement for its 1994
annual meeting of stockholders are incorporated by reference into Part
III of Form 10-K.<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I Page
<S> <C>
Item 1. BUSINESS 3
Item 2. PROPERTIES 11
Item 3. LEGAL PROCEEDINGS 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
EXECUTIVE OFFICERS OF THE REGISTRANT 12
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 12
Item 6. SELECTED FINANCIAL DATA 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 53
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 53
(See Part I for Executive Officers of the Registrant)
Item 11. EXECUTIVE COMPENSATION 53
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 53
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 53
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 53
SIGNATURES 54
EXHIBIT INDEX 55
</TABLE>
<PAGE>
PART I
Item 1. BUSINESS
General
Barrett Business Services, Inc. ("Barrett" or the "Company"), was
incorporated in the state of Maryland in 1965. Barrett provides light
industrial, clerical and technical employees to a wide range of
businesses on both a temporary basis and a longer-term leased basis.
The Company believes it is the largest provider of temporary staffing
and staff leasing services in Oregon, measured by revenue. Services are
provided through a branch network of 14 offices, nine located throughout
the western half of Oregon, two in northern California, two in Maryland,
and one in Seattle, Washington. The Company provides employees to a
diverse set of customers, including forest products and agriculture-
based companies, electronics manufacturers, transportation and shipping
enterprises, professional firms and general contractors.
Recent Acquisitions
In March 1993, the Company acquired a branch office of CDI
Corporation-West in Sacramento, California, with annual revenues of
approximately $300,000. The acquired temporary services operations were
combined with the Company's existing Sacramento office.
The Company completed the purchase of the assets of Personnel
Management & Consulting, Inc. ("PMC"), with unaudited revenues of
$800,000 for the year ended December 31, 1993, in February 1994. PMC,
which had been operating since mid-1992, had offices located in each of
Easton and Salisbury, Maryland, and Seaford, Delaware.
On March 7, 1994, the acquisition of the assets of Golden West
Temporary Services, operating through four offices in the San Francisco
Bay Area of California, was consummated by the Company. The acquired
assets included office equipment and leases, customer and employee
lists, and trade names, logos and goodwill. The acquired operations had
total revenues of $24,533,000 for the year ended December 31, 1993. The
purchase price of $4,514,000 was paid in cash from working capital and
was determined by arm's-length negotiation between the parties.
Barrett's growth strategy includes expanding operations at existing
offices, primarily through its ongoing marketing and sales program, as
well as acquiring additional personnel-related businesses, both in its
existing markets and in other geographic areas. The Company reviews
acquisition opportunities on an ongoing basis, but there is no assurance
that any additional acquisitions will be completed in the foreseeable
future.
Temporary Services
General. Temporary employees permit businesses to meet peak or
extraordinary demands caused by such factors as seasonal increases,
vacations, illnesses, special projects and marketing promotions without
incurring the ongoing expense and administrative responsibilities
associated with recruiting, hiring and retaining additional permanent
employees. The use of temporary services permits businesses to apply to
their personnel requirements the "just-in-time" approach adopted by many
manufacturers in recent years to manage raw materials inventories. By
maintaining a core of permanent employees to meet minimum requirements
and managing increased demand through greater use of temporary
employees, companies are able to convert a portion of their fixed
personnel expense to variable expense and to lower the amounts they are
required to spend overall on recruiting and training efforts, severance
compensation, recordkeeping, payroll and other personnel management
functions.
The Company's Temporary Services. The Company provides light
industrial, clerical and technical workers on a temporary basis to a
broad range of businesses, including forest products and agriculture-
based companies, electronics manufacturers, transportation and shipping
companies, professional firms, and construction contractors. Light
industrial workers perform such tasks as operation of machinery, loading
and shipping, site preparation for conventions and other special events,
construction site cleanup and janitorial services, and generated
approximately 73% of the Company's 1993 temporary services revenues.
Clerical workers, who accounted for approximately 19% of 1993 temporary
services revenues, include secretaries, receptionists, typists and
clerks. Technical personnel include electronic parts assembly workers,
engineers in a variety of fields, including aerospace, chemicals,
electronics and general industry, and designers and drafters of
electronic parts; these workers represented approximately 8% of the
Company's 1993 temporary services revenues.
Temporary assignments may last a day, a week or months, depending
upon the client's requirements. The client pays only for actual hours
worked by temporary personnel and may terminate their services at any
time. A significant portion of the temporary services provided by the
Company is project-oriented, requiring one or more employees for a
period of time to accomplish a nonrecurring or periodic task, such as
converting to a new data processing system or taking a physical
inventory.
The Company's temporary services customers range in size from small
local firms to large national companies using the Company's services on
a local basis. The Company provided temporary services to more than
3,600 clients during 1993, up from approximately 2,800 clients in 1992.
None of the Company's temporary services clients individually accounted
for more than 5% of its total annual revenues during 1993.
Business Strategy. The Company emphasizes prompt, personalized
service in assigning quality, trained personnel at competitive rates to
users of its temporary services. Since 1980, the Company has relied on
internally developed computer databases of employee skills and
availability to match customer needs with available qualified employees.
As a local company operating in selected market areas, Barrett has an
understanding of the unique factors affecting its clientele that enables
it to personalize its response to its customers' needs.
Barrett provides extensive training to its branch office managers
and other sales personnel to develop and maintain a high level of
service and professionalism. Its ongoing training program includes in-
house presentations, outside seminars, video instruction and role
playing. Both the successful solicitation of new customers and the
retention of existing accounts are rewarded through a commission
structure. Sales commissions represent between one-third and two-thirds
of a salesperson's compensation. In addition, branch office staff
participate in the Company's profit-sharing program. See "Employees and
Employee Benefits," below.
Recruiting. The Company employs a variety of methods to recruit
its workforce of temporary employees, including newspaper advertising
and flyers distributed at colleges and vocational schools. In addition,
a substantial number of new employees are hired through referrals by
Barrett's existing employees. The Company has generally found it easier
to recruit and retain qualified personnel during periods of higher
unemployment and must devote more resources to locating new employees
during upturns in the economies in its market areas. The Company may be
unable to pass on the full amount of such increased recruiting and
personnel costs in the form of higher prices for temporary services,
resulting in lower gross profit margins.
Each employee applicant undergoes an interview, skills assessment
and reference verification process to determine level of ability and
past job performance. Following hire and placement, performance is
reviewed with clients to assure customer satisfaction and quality
control. Barrett provides its customers with an unconditional guarantee
of performance; if a client is dissatisfied for any reason, no payment
is required.
The Company believes that its wage and benefit package, customer
base, and opportunities for part-time and flexible scheduling have
contributed significantly to its success in recruiting and retaining
quality personnel in numbers sufficient to meet customer demand. See
"Employees and Employee Benefits," below.
Sales and Marketing. The Company markets its temporary services
primarily through personal sales presentations by its branch office
managers and trained sales force and, to a lesser extent, through
advertising in various publications, including local newspapers and the
Yellow Pages. The Company also benefits from referrals by existing
clients; staff leasing clients frequently use Barrett's temporary
services as well.
Following development of a preliminary profile of a prospective
client's needs, the Company schedules a meeting with the client's
personnel manager to explain the Company's services. Based on this
information, Barrett develops an hourly charge for its temporary
services which is designed to be competitive in relation to the
marketplace. The actual cost to the client of an employee typically
ranges from 135% to 150% of salary, including employment taxes, employee
benefits and insurance and administrative costs. The Company believes
it has been able to maintain a price advantage due to the lower costs
associated with its self-insured workers' compensation program when
compared to the cost of workers' compensation insurance coverage.
The Company's sales and marketing efforts have generally increased
during periods of economic decline, when demand for temporary services
decreases. As a result of this reduced demand, the higher costs
associated with sales and marketing typically cannot be recovered
through price increases, with the result that gross margins decline.
Billing. The Company prepares weekly customer invoices immediately
following each payroll period through the centralized payroll and
billing operations at its corporate headquarters. Barrett has not
experienced significant problems in collecting accounts to date, which
it attributes to client satisfaction with its services, its analysis of
potential clients' credit history prior to agreeing to provide services,
and regular monitoring of accounts.
Staff Leasing Services
General. Many businesses, particularly those with a limited number
of employees, find personnel administration requirements to be unduly
complex and time-consuming. These businesses often cannot justify the
expense of a full-time human resources staff. In addition, the
escalating costs of health and workers' compensation insurance in recent
years, coupled with the increased complexity of laws and regulations
affecting the workplace, have encouraged these small to mid-sized
businesses to consider staff leasing.
The Company's Staff Leasing Services. In a staff leasing
arrangement, the Company hires, as its own employees, workers who were
previously employed directly by the client and then leases these
employees to the client. The Company assumes responsibility for
handling some or all personnel-related matters, including payroll and
payroll taxes, employee benefits, health and workers' compensation
insurance coverage and related administrative paperwork. The Company
also hires and fires leased employees, although the client remains
responsible for day-to-day assignments, supervision and training and, in
most cases, recruiting.
The Company began offering staff leasing services to Oregon
customers in 1990, and expanded its worker leasing program to Maryland
in the first quarter of 1994. The number of Barrett's staff leasing
clients increased from approximately 300 at December 31, 1992, to
approximately 425 at year-end 1993. The Company has entered into staff
leasing arrangements with a wide variety of clients, including
reforestation companies, moving and shipping companies and professional
firms. Staff leasing clients are typically small to mid-sized
businesses with up to 50 employees. None of the Company's staff leasing
clients individually accounted for more than 5% of its total annual
revenues during 1993.
Business Strategy. The Company believes that it has attracted
significant numbers of new staff leasing clients since 1990 by
demonstrating the potential for cost reductions offered by the Company's
self-insured workers' compensation program. Barrett also offers a
variety of employee benefits, which it can generally provide on a cost-
effective basis due to its large size relative to its clients. The
Company believes these benefits reduce employee turnover and increase
the appeal of staff leasing arrangements to most clients. The overall
cost to the client for its leased employees is typically at or below the
cost per employee that the client would incur if it employed its
workforce directly.
The Company's standard lease agreement provides for a minimum one-
year term, with successive one-year renewals unless notice of
termination is given by either party. The agreement permits
cancellation by either party upon 60 days' prior written notice. In
addition, the Company may terminate the agreement at any time for
specified reasons, including nonpayment or failure to follow Barrett's
workplace safety program. The agreement also provides for
indemnification of the Company by the client against losses arising out
of any default by the client under the agreement, including failure to
comply with any employment-related, health and safety or immigration
laws or regulations.
Sales and Marketing. The Company markets its staff leasing
services through its Oregon and Maryland branches using its branch
office sales staff. The Company also obtains referrals from existing
clients and other third parties, and places advertisements in the Yellow
Pages.
Prior to entering into a staff leasing arrangement, the Company
performs an analysis of the potential client's actual personnel and
workers' compensation costs based on information provided by the
customer. Barrett also introduces its workplace safety program and
makes recommendations as to improvements in procedures and equipment
following a safety inspection of the customer's facilities. Once the
client has agreed to implement the Company's safety program, the Company
proposes a leasing arrangement at a price which is typically at or below
the client's prior overall personnel costs per employee. Barrett also
offers significant financial incentives to clients to maintain a safer
work environment, thus enabling clients to achieve additional savings.
Typically, clients share these incentives with their leased employees.
Billing. Through centralized operations at the Company's
headquarters in Portland, Oregon, weekly payroll checks are prepared for
each staff leasing client and delivered by courier. The Company
invoices its clients following the end of each payroll period. Such
invoices are due upon receipt and are generally paid within five
business days. The costs of health insurance coverage and Barrett's
cafeteria plan are passed through to its staff leasing clients based on
the number of participating employees. The Company often requires a
deposit from its staff leasing clients to cover a portion of the
anticipated billing for one payroll period. The Company has had
generally favorable results with collecting accounts to date, which it
attributes to the prompt turnover of receivables, its analysis of
potential clients' credit history, and regular monitoring of accounts.
Self-Insured Workers' Compensation Program
The Company believes that its self-insured workers' compensation
program has been key to its growth in revenue and profitability in
Oregon. Significant elements contributing to the success of the
workers' compensation program include the regulatory climate surrounding
workers' compensation, the Company's workplace safety program and the
aggressive claims management approach taken by the Company and its
third-party administrators, all of which are described in detail below.
Elements of Workers' Compensation System. State law generally
mandates that an employer reimburse its employees for the costs of
medical care and other specified benefits for injuries or illnesses
incurred in the course and scope of employment. The benefits payable
for various categories of claims are determined by state regulation and
vary with the severity and nature of the injury or illness and other
specified factors. In return for this guaranteed protection, workers'
compensation is an exclusive remedy and employees are generally barred
from seeking other damages from their employer for workplace injuries.
Most states require employers to maintain workers' compensation
insurance coverage or otherwise demonstrate financial responsibility to
meet workers' compensation obligations to employees. In many states,
employers who meet certain financial and other requirements are
permitted to self-insure.
Self-Insurance for Workers' Compensation. In August 1987 and
November 1993, the Company became a self-insured employer for workers'
compensation coverage in Oregon and Maryland, respectively. The
regulations governing self-insured employers in each state require the
Company to maintain deposits of cash, government securities or other
financial instruments to cover potential claims losses.
Barrett also maintains excess workers' compensation insurance
coverage for claims exceeding $350,000 ($300,000 prior to January 1,
1994) in an unlimited amount (up to $10,000,000 per occurrence for
claims through December 31, 1993) pursuant to an annual policy. The
excess insurance policy contains standard exclusions from coverage,
including punitive damages, fines or penalties in connection with
violation of any statute or regulation and losses covered by other
insurance or indemnity provisions. The Company maintains workers'
compensation insurance coverage through state programs in California and
Washington and, to a limited extent, through independent insurance
carriers in Washington. The Company is presently pursuing applications
to become a self-insured employer in California and Washington.
Workplace Safety Program. In the late 1980's, the Company saw an
opportunity to package and market to small and mid-sized Oregon
employers its safety program designed to assist clients in managing
workplace injuries and reducing workers' compensation claims. The
Company's program, which was expanded to Maryland in 1993, begins with
an on-site safety inspection by one of its risk managers. Barrett then
designs a safety program for the client, including employee and
supervisor safety training and regular meetings between management and
employees to discuss safety precautions. Among other safety measures,
the Company encourages clients to provide on-site first aid care and to
make improvements in workplace procedures and equipment to reduce the
risk of injury. The Company's third-party administrators for workers'
compensation claims also assist the Company in performing safety
inspections of client worksites and provide technical advice regarding
workplace safety measures.
A key factor to the success of the Company's safety program is its
system of financial incentives to reward reductions in the number and
severity of work-related injuries. If the cost of claims is less than
agreed upon amounts, the Company pays an annual amount based on a
percentage of the staff leasing client's payroll. Clients typically
share these incentives with their leased employees. Staff leasing
clients and leased employees are thus given an economic incentive to
cooperate in maintaining a safer work environment and reducing the
frequency of fraudulent claims.
During 1993, Barrett implemented a corporate-wide mandatory pre-
employment drug testing program. Results of the program are believed to
include a reduction in the frequency of fraudulent claims and in
accidents in which the use of illegal drugs appears to have been a
factor.
Claims Management. The Company also seeks to contain its workers'
compensation costs through an aggressive approach to claims management.
Barrett uses managed care systems to reduce medical costs and keeps
time-loss costs to a minimum by assigning injured workers, whenever
possible, to temporary assignments which accommodate the worker's
physical limitations. The Company believes that these temporary
assignments minimize both time actually lost from work and covered time-
loss costs. Barrett has also engaged third-party administrators to
provide additional claims management expertise. Typical management
procedures include performing thorough and prompt on-site investigations
of claims filed by employees, working with doctors to encourage
efficient medical management of cases, denying questionable claims, and
negotiating early settlements to cut off future case development and
costs.
In July 1993, the Company acted to decentralize responsibility for
safety and claims management to its branch offices in Oregon and
Maryland. This operational change effectively tripled the total
personnel resources dedicated to injury prevention and claims expense
control, enabling the Company to conduct more effective on-site safety
training and more thorough and timely investigation of claims.
Elements of Self-Insurance Costs. The costs associated with the
Company's self-insured workers' compensation program include loss and
loss adjustment expense payments with respect to claims made by
employees, fees payable to the Company's third-party administrators,
assessments payable to state workers' compensation regulatory agencies,
premiums for excess workers' compensation insurance coverage, and safety
incentive payments. Although not directly tied to the size of the
Company's payroll, the number of claims and related loss payments may be
expected to increase with growth in the total number of employees.
Third-party administration fees also vary with the number of claims
administered. The state assessments are based on payroll amounts and
increase proportionately with increases in the Company's employee base.
Excess insurance premiums are also based in part on the amount of the
Company's payroll. Safety incentives expense may increase as the number
of the Company's staff leasing employees rises, although increases will
only occur for any given client if such client's claims costs are below
agreed upon amounts.
Workers' Compensation Claims Experience and Reserves
In connection with its workers' compensation self-insurance
program, the Company is liable for loss and loss adjustment expense
payments under the workers' compensation laws of Oregon and Maryland.
Several months may elapse between the occurrence of a workers'
compensation loss, the reporting of the claim to the Company and the
Company's payment of that claim. The Company reflects its liability for
the ultimate payment of all incurred claims and claims adjustment
expenses by establishing loss and allocated loss adjustment expense
reserves, which are balance sheet liabilities representing estimates of
future amounts needed to pay claims and related expenses with respect to
covered events that have occurred.
When a claim involving a probable loss is reported, the Company
establishes a case reserve for the estimated amount of its ultimate loss
and allocated loss adjustment expense payments. The estimate reflects
an informed judgment based on established reserving practices and the
experience and knowledge of Barrett's third-party administrators
regarding the nature and value of the claim, as well as the estimated
expense of settling the claim, including legal and other fees and
expenses of administering claims ("allocated loss adjustment expenses").
The reserves also provide for losses incurred but not reported ("IBNR"),
as well as future development in excess of case reserves on losses
reported to the Company (together, "IBNR reserves").
As part of the reserving process, historical data are reviewed, and
consideration is given to the anticipated effect of various factors,
including known and anticipated legal developments, changes in social
attitudes, inflation and economic conditions. Reserve amounts are
necessarily based on management's estimates, and as other data become
available and are reviewed these estimates and judgments are revised,
resulting in increases or decreases to existing reserves. As of
December 31, 1993, the Company's loss reserves totaled $2,434,000,
compared to $1,337,000 at year-end 1992. The total number of self-
insured claims reported in 1993 was 1,085, compared to 979 for 1992.
Barrett has engaged a nationally-recognized, independent actuarial firm
to review the Company's reserves periodically. Based in part on such
review, the Company believes its total loss reserves at December 31,
1993, make adequate provision for its workers' compensation loss and
allocated loss adjustment expense obligations at such date. There can,
however, be no assurance that the Company's actual future workers'
compensation obligations will not exceed the amount of its reserves,
with a corresponding negative impact on future earnings, due to such
factors as unanticipated loss development of known claims, an increase
in the number and severity of new claims, and a lack of historical
claims experience with new staff leasing clients.
Employees and Employee Benefits
At December 31, 1993, the Company had approximately
7,615 employees, including approximately 3,900 temporary services
employees, 3,600 leased employees and 115 managerial, sales and
administrative employees. The number of employees at any given time can
vary significantly due to special project requests, seasonality and
other factors. None of the Company's employees are covered by a
collective bargaining agreement. Each of Barrett's managerial, sales
and administrative employees has entered into a standard form of
employment agreement which, among other things, contains covenants not
to engage in certain activities in competition with the Company for 18
months following termination of employment and to keep the Company's
customer lists and other proprietary information confidential. Barrett
believes its employee relations are good.
Benefits offered to Barrett's temporary employees include group
health insurance, a cafeteria plan permitting employees to use pre-tax
dollars to obtain various services, including medical, dental and child
care, and a 401(k) savings plan pursuant to which employees may begin
making contributions upon reaching 21 years of age and completing 1,000
hours of service in any consecutive 12-month period. The Company may
also make contributions to the savings plan, which vest over seven years
and are subject to certain legal limits, at the sole discretion of the
Company's board of directors. Leased employees may participate in the
Company's benefit plans, provided that the group health insurance
premiums may, at the client's option, be paid by payroll deduction.
Barrett also maintains profit-sharing bonus plans for its managerial and
administrative personnel.
Regulatory and Legislative Issues
The Company is subject to the laws and regulations governing self-
insurers under the workers' compensation systems in Oregon and Maryland.
In addition, legislation was adopted in Oregon in 1993 which requires a
worker leasing company, such as Barrett, to be licensed by the Workers'
Compensation Division of the Oregon Department of Consumer and Business
Services. Temporary services companies are expressly exempt from the
legislation. Worker leasing companies are required to notify the
Workers' Compensation Division if they provide workers' compensation
coverage for their leased employees, and an insurer providing such
coverage is required to use the experience of the client for the purpose
of assigning an experience rating to the worker leasing company. Worker
leasing companies are also required to assure that each leasing client
provides adequate training and supervision for its workers in compliance
with statutory requirements for workplace safety and to give 30 days'
written notice of termination of its obligation to provide workers'
compensation coverage for leased employees and other subject employees
of a leasing client. Although compliance with the legislation has
caused Barrett to make certain changes in its staff leasing operations
and client contracts and has subjected it to additional financial risk
with respect to workers' compensation expense, particularly with respect
to leasing clients who breach their payment obligations to the Company,
Barrett does not anticipate that compliance with the legislation will
have a material impact on its business operations, financial condition,
or operating results.
Federal legislative proposals for national health care reform
include provisions extending mandatory health insurance benefits to
virtually all classes of employees. In addition, workers' compensation
coverage may be included in the reform package ultimately adopted.
While it is impossible to predict if, when and in what form health care
reform will be enacted, elements of such reform may have a material
adverse effect on the Company's operations and its self-insured workers'
compensation program.
Competition
The staff leasing and temporary services businesses are
characterized by rapid growth and intense competition. The temporary
services market includes competitors of all sizes, including several,
such as Manpower, Inc., Kelly Services, Inc., The Olsten Corporation,
Interim Services, Inc., and Adia Services, Inc., which are national in
scope and have substantially greater financial and marketing resources
than the Company. In addition to national companies, Barrett competes
with numerous local and regional firms for both customers and personnel.
The Company estimates that approximately 50 firms provide temporary
services in Oregon. There are relatively limited barriers to entry into
the temporary services business. The principal competitive factors in
the temporary services industry are price, the ability to provide
qualified workers in a timely manner and the monitoring of job
performance. The Company attributes its growth in temporary services
revenues to the cost-efficiency of its operations, which permits it to
price its services competitively, and to its ability through its branch
office network to understand the needs of its customers and fill those
needs with competent personnel.
Although there are believed to be more than 1,300 staff leasing
companies currently operating in the United States, many of these
potential competitors are located in states in which the Company
presently does not operate. Barrett believes that approximately 13
staff leasing firms are operating in Oregon, but that the Company has
the largest presence in the state. The Company may face additional
competition in the future from new entrants to the field, including
other temporary services companies, payroll processing companies and
insurance companies. Certain staff leasing companies operating in areas
in which the Company does not now, but may in the future, offer its
services have greater financial and marketing resources than the
Company. Competition in the staff leasing industry is based largely on
price, although service and quality are also important. Barrett
believes that its growth in staff leasing revenues is attributable to
its ability to provide small and mid-sized companies with the
opportunity to provide enhanced benefits to their employees while
typically reducing the clients' overall personnel administration and
workers' compensation costs. The Company's competitive advantage may be
adversely affected by a substantial increase in the costs of maintaining
its self-insured workers' compensation program or by a general decrease
in workers' compensation premiums due to reform efforts or workplace
safety improvements.
<PAGE>
Item 2. PROPERTIES
The Company provides temporary services through all 14 of its
branch offices. Staff leasing services are currently offered through
each of Barrett's Oregon and Maryland locations. The following table
shows the locations of the Company's branch offices and the year in
which each branch was opened or acquired. The Company's Oregon branches
accounted for approximately 90% of its total revenues in 1993. The
Company also leases space in nine other locations in its market areas
which it uses to recruit employees.
<TABLE>
<CAPTION>
Year Opened Year Opened
Oregon Locations Or Acquired Other Locations or Acquired
<S> <C> <C> <C>
Portland (Industrial) 1984 Sacramento, California 1988
Portland (Bridgeport) 1988 Santa Clara, California 1994
Bend 1990 Baltimore, Maryland 1951
Medford 1990 Easton, Maryland 1994
Salem 1990 Seattle, Washington 1981
Albany 1991
Eugene 1991
Grants Pass 1991
Portland (Leasing) 1993
</TABLE>
In May 1993, Barrett purchased an office building in Portland,
Oregon, with approximately 9,200 square feet of office space, for a
total purchase price of $925,000. The Company's corporate headquarters
were relocated to the new building in June 1993. The building is
subject to a mortgage loan with a principal balance of approximately
$683,000 at December 31, 1993.
The Company also owns another office building in Portland, Oregon,
in which its headquarters were previously located. The building is
subject to a mortgage loan with a principal balance at December 31,
1993, of approximately $283,000 due in full in November 1998 and has
approximately 7,000 square feet of office space. Barrett moved its
Portland (Bridgeport) branch office to this building in September 1993.
Barrett leases the office space housing its other branch offices.
At December 31, 1993, such leases had expiration dates ranging from less
than one year to six years, with total minimum payments through 1998 of
approximately $578,000.
Item 3. LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to
this item pending at December 31, 1993, or at the date of this report.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company are elected annually and serve at the
discretion of the Company's board of directors. There are no family
relationships among the Company's executive officers and directors. At
February 25, 1994, the executive officers of Barrett were as follows:
William W. Sherertz, age 48, has acted as chief executive officer
of the Company since 1980. He has also been a director of the Company
since 1980, and was elected President of the Company in March 1993.
Jack D. Williamson, Jr., age 39, was elected Vice President--
Finance, Treasurer, Secretary and a director of the Company in March
1993. He had previously been controller of the Company since 1986.
Peter J. Schenk, age 35, joined the Company as director of
operations and marketing in December 1991. He was elected Vice
President--Operations and Marketing in March 1993. From 1986 to 1991,
Mr. Schenk was Vice President--Marketing for American Consulting
Services, a provider of marketing consulting services to media
companies.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded over-the-counter in the
National Market System under the (NASDAQ) symbol BBSI. At February 25,
1994, there were 38 stockholders of record of the Company's common
stock. The Company has not declared or paid any cash dividends since
the closing of its initial public offering of its common stock on
June 18, 1993, and has no present plan to do so in the foreseeable
future. The following table presents the high and low sales prices of
the Company's common stock for each quarterly period since June 18,
1993, as reported by NASDAQ:
<TABLE>
<CAPTION>
1993
High Low
<S> <C> <C>
June 18 through June 30 $ 9.50 $ 7.00
Third Quarter 14.25 7.75
Fourth Quarter 16.75 13.50
</TABLE>
Item 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in
conjunction with the Company's financial statements and the accompanying
notes presented in Item 8 of this report.<PAGE>
<TABLE>
<CAPTION>
Fiscal Six
Year Months
Ended Ended
June 30, Dec. 31, Years Ended December 31,
1989 1989<F1> 1990 1991 1992 1993
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data<F2>:
Revenues:
Temporary services . . $20,829 $11,941 $23,433 $31,041 $34,681 $41,755
Staff leasing services --- --- 3,630 16,949 45,444 58,512
Total . . . . . . . 20,829 11,941 27,063 47,990 80,125 100,267
Cost of revenues:
Direct payroll costs . 15,502 8,890 19,774 35,486 59,820 75,171
Payroll taxes and
benefits . . . . . . . . 1,780 1,002 2,252 4,309 7,826 9,911
Workers' compensation 602 290 990 1,958 3,233 4,591
Safety incentives . . --- --- 68 270 651 598
Total . . . . . . . 17,884 10,182 23,084 42,023 71,530 90,271
Gross margin . . . . . . 2,945 1,759 3,979 5,967 8,595 9,996
Selling, general, and
administrative expenses . 2,456 1,366 3,380 5,054 6,339 6,820
Income from operations . 489 393 599 913 2,256 3,176
Other (expense) income:
Litigation settlement --- --- --- (600) --- ---
Interest expense . . . (150) (115) (223) (175) (77) (86)
Interest income . . . 29 14 44 58 70 161
Other, net . . . . . . (32) 7 (60) (31) 26 133
Total . . . . . . . (153) (94) (239) (748) 19 208
Income before provision for
income taxes . . . . . . $ 336 $ 299 $ 360 $ 165 $2,275 $3,384
Unaudited pro forma
data<F3>:
Net income . . . . . . $ 152 $ 180 $ 221 $ 98 $ 1,385 $ 2,060
Net income per share . $ .08 $ .09 $ .11 $ .05 $ .69 $ .78
Weighted average common
shares outstanding . . . 1,992 1,992 1,992 1,994 2,000 2,630
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
1989 1990 1991 1992 1993
(In thousands)
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet
Data:
Working capital (deficit) $ 332 $ (142) $ (589) $ (678) $7,017
Total assets . . . . . . 3,787 4,355 5,980 7,219 18,425
Long-term debt, net of
current portion . . . . . 770 690 446 292 946
Stockholders' equity . . 1,060 1,188 962 1,574 10,480
_____________________________
<FN>
<F1> Effective January 1, 1990, the Company changed its fiscal year-end from June 30 to
December 31, requiring presentation of financial information for the six-month period
ended December 31, 1989.
<F2> The results of each of six companies acquired by the Company between January 1, 1990 and
March 31, 1993, have been included since the respective date of its purchase.
<F3> Effective July 1, 1987, the Company elected to be treated as a corporation subject to
taxation under Subchapter S of the Code, pursuant to which the net earnings of the
Company were taxed directly to the Company's stockholders rather than to the Company.
The Company terminated its election on April 30, 1993, and recognized a cumulative net
deferred tax asset of $505,000. Accordingly, the Company was not subject to federal (and
some state) corporate income taxation during the periods shown above until May 1, 1993.
The amounts shown reflect a pro forma tax provision. For the year ended December 31,
1993, the provision for income taxes was $437,000, net income was $2,947,000, and net
income per share was $1.12.
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the percentages of total revenues
represented by selected items in the Company's Statement of Operations for
the years ended December 31, 1993, 1992 and 1991, included in Item 8 of this
report. References to the Notes to Financial Statements appearing below are
to the notes to the Company's financial statements included in Item 8 of this
report.
<TABLE>
<CAPTION>
Percentage of Total Revenues
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Temporary services revenues. . . . . . . . 41.6% 43.3% 64.7%
Staff leasing services revenues. . . . . . 58.4 56.7 35.3
Direct payroll costs . . . . . . . . . . . 74.9 74.7 73.9
Payroll taxes and benefits . . . . . . . . 9.9 9.8 9.0
Workers' compensation. . . . . . . . . . . 4.6 4.0 4.1
Safety incentives. . . . . . . . . . . . . .6 .8 .6
Gross margin . . . . . . . . . . . . . . . 10.0 10.7 12.4
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 6.8 7.9 10.5
Income from operations . . . . . . . . . . 3.2 2.8 1.9
Other income (expense) . . . . . . . . . . .2 --- (1.6)
Pretax income. . . . . . . . . . . . . . . 3.4 2.8 .3
Pro forma provision for income taxes . . . 1.3 1.1 .1
Pro forma net income . . . . . . . . . . . 2.1 1.7 .2
</TABLE>
Years Ended December 31, 1993 and 1992
Temporary and Staff Leasing Services Revenues. Total revenues
increased $20,142,000 (25.1%) to $100,267,000 for 1993 compared to 1992. The
increase in total revenues was attributable to growth in temporary services
revenues and staff leasing services revenues of $7,074,000 (20.4%) and
$13,068,000 (28.8%), respectively.
Moderate economic growth and uncertainty regarding long-term economic
prospects increased demand for the Company's temporary services during 1993
compared to 1992. The Company attributes its growth in temporary services
revenues to the cost-efficiency of its operations, which permits it to price
its services competitively, and to its ability through its branch office
network to understand the needs of its customers and fill those needs with
competent personnel.
During the first quarter of 1994 the Company expanded its operations
through acquisition of two temporary services businesses. The acquired
companies had total revenues of approximately $25,000,000 during 1993,
through seven branch offices. See "Liquidity and Capital Resources" below.
Market conditions remained favorable for the Company's staff leasing
services in Oregon during 1993, due to a limited number of competitors in
this industry and the competitive advantage afforded by the financial
incentives offered to the Company's clients for reductions in the cost of
workplace injuries.
The Company believes the growth of its staff leasing services is due in
part to its ability to assume personnel administration functions while
providing employees to clients at an overall cost that is generally less than
the clients would have to pay if they carried such employees on their
payrolls. The Company's services are cost-effective because of (i) the
economies of scale and, in some cases, additional benefits available to it as
an employer handling a significantly larger volume of payroll, payroll taxes
and fringe benefits as compared to the typical staff of up to 50 employees
handled by its staff leasing clients and (ii) the lower cost per employee of
the Company's self-insured workers' compensation program in Oregon and
Maryland as compared to the third-party insurance coverage its clients
typically would otherwise be required to carry. See "Workers Compensation
Expense" below.
Payroll Costs, Payroll Taxes and Benefits. Payroll costs, payroll
taxes and benefits for the Company's temporary and staff leasing employees
increased by $17,436,000 (25.8%) to $85,082,000 in 1993 compared to
$67,646,000 in 1992, slightly ahead of the 25.1% growth in total revenues for
the same period. The increase in payroll costs, payroll taxes and benefits
is primarily attributable to an increase in the number of employees and to
higher participation in the Company's fully insured group health plan. On
June 1, 1993, the Company replaced its various regional vendors of group
health insurance with a single national underwriter to take further advantage
of available volume discounts. The Company believes the number of employees
participating in its group health plan will continue to rise for the
foreseeable future; however, the resulting increase in the Company's benefits
costs is expected to be offset by decreases in the statutory payroll tax
rates for the Company during 1994.
Workers' Compensation Expense. The Company has been a self-insured
employer for workers' compensation coverage in Oregon since August 1987 and
became self-insured in Maryland in November 1993. Workers' compensation
expense currently includes the costs of self-insurance for the Company's
employees in Oregon and Maryland, and third-party insurance coverage for such
employees in California and Washington. Self-insurance expenses include case
reserves for reported claims, reserves for claims incurred but not reported,
loss adjustment expenses, third-party administrator fees, reinsurance
premiums, and assessments paid to the States of Oregon and Maryland.
Workers' compensation expense increased by $1,358,000 (42.0%) during 1993
compared to 1992, due primarily to increases in the number of temporary and
staff leasing employees in Oregon. Self-insurance expense in Oregon
increased by approximately $1,342,000 in 1993 compared to 1992.
During the third quarter of 1993, the Company submitted applications
for self-insurance of its workers' compensation costs for its operations in
California and Washington. In January 1994, the Company's application in
California was denied. The Department of Industrial Relations of the State
of California ("Department of Industrial Relations") cited as reasons for the
denial concerns regarding the Company's financial strength (based on its 1992
audited financial statements) and the effectiveness of its injury and illness
prevention program. The Company believes that its audited financial
statements at December 31, 1993 will satisfy the Department of Industrial
Relations' financial requirements. The Company also plans to submit
additional information demonstrating its ability to implement effective
injury and illness prevention programs, based on its workplace safety program
in Oregon. Accordingly, the Company plans to submit an amended application
to the Department of Industrial Relations during the second quarter of 1994.
However, there can be no assurance that self-insured status will be granted
on terms which are financially feasible to the Company. The State of
Washington is scheduled to review the Company's application for workers'
compensation self-insurance during the second quarter of 1994.
Upon becoming self-insured, the Company's workers' compensation expense
is tied directly to the incidence and severity of workplace injuries to its
employees. Significant elements contributing to the success of the workers'
compensation program include the regulatory climate surrounding workers'
compensation, the Company's workplace safety program and the aggressive
claims management approach taken by the Company and its third-party
administrators.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including the provision for doubtful accounts and
the amortization of intangibles) consist of compensation and other expenses
incident to the operation of the Company's headquarters and branch offices
and marketing of its services. These expenses increased 7.6% for 1993
compared to 1992. Of the $481,000 increase, $81,000 is attributable to an
increase in the provision for doubtful accounts arising from to the failure
of one of the Company's staff leasing customers in September 1993. As
a percentage of total revenues, selling, general and administrative expenses
decreased from 7.9% during 1992, to 6.8% during 1993, due to greater
utilization of existing branch office capacity and the shift of the Company's
business toward staff leasing services, which have lower overhead
requirements as compared to temporary services.
Provision and Pro Forma Provision for Income Taxes. The Company
was exempt from taxation as an S corporation until its S corporation election
was terminated on April 30, 1993. A one-time tax benefit arising from net
cumulative temporary differences in the timing of reporting certain
deductible items for financial statement and income tax purposes was
recognized by the Company as a reduction in its provision for income taxes
for the year ended December 31, 1993 in the amount of $505,000. The pro
forma effective tax rate of 39.1% is the effective tax rate that would have
been recorded if the Company had been a C corporation for the periods
presented. See Note 13 of the Notes to Financial Statements.
Years Ended December 31, 1992 and 1991
Temporary and Staff Leasing Services Revenues. Total revenues
increased $32,135,000 (67.0%) to $80,125,000 for 1992, compared to 1991. The
increase in total revenues was attributable to growth in temporary services
revenues and staff leasing services revenues of $3,640,000 (11.7%) and
$28,495,000 (168.1%), respectively. Staff leasing revenue growth was due
primarily to higher volume associated with an increase in the number of staff
leasing clients. Approximately one-third of the increase in clients resulted
from the acquisition of Employee Leasing of Oregon, Inc. ("ELO"), in
December 1991 and American Staff Management, Inc. ("ASM"), in March 1992,
with annual aggregate revenues of approximately $9,000,000. See Note 2 of
the Notes to Financial Statements for unaudited pro forma information on the
acquisitions.
Payroll Costs, Payroll Taxes and Benefits. Payroll costs, payroll
taxes and benefits for the Company's staff leasing and temporary services
employees increased by $27,851,000, or 70.0%, to $67,646,000 in 1992 compared
to 1991, slightly in excess of the 67.0% growth in total revenues for the
same period. The increase in payroll cost, payroll taxes and benefits is
primarily attributable to an increase in the number of employees. As
a percentage of revenue, such costs increased from 82.9% in 1991 to 84.5% in
1992 due to the growth in staff leasing services revenues as a percentage of
total revenues.
Workers' Compensation Expense. Workers' compensation expense increased
by $1,275,000, or 65.1%, in 1992 compared to 1991 due primarily to an
increase in the number of temporary and staff leasing employees.
Self-insurance expense in Oregon increased by 68.3% in 1992 compared to 1991,
while premium expense relating to the Company's operations in California,
Maryland and Washington increased by 48.0% from 1991 to 1992.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including the provision for doubtful accounts and
the amortization of intangibles) increased by $1,285,000 (25.4%) to
$6,339,000 in 1992 compared to 1991, due primarily to an increase in the
number of headquarters and branch employees needed to manage the Company's
revenue growth. As a percentage of total revenues, selling, general and
administrative expenses decreased from 10.5% in 1991 to 7.9% in 1992, due
primarily to the shift of the Company's business toward staff leasing
services.
Other Income (Expense). The Company had other income of $19,000 in
1992 as compared to other expense of $748,000 in 1991, due primarily to
material litigation costs incurred in 1991 and to a 56.0% decline in interest
expense in 1992 compared to 1991 as a result of lower average borrowings
outstanding and a lower interest rate environment.
Pro Forma Provision for Income Taxes. The pro forma effective tax
rates would have been 40.6% in 1991 and 39.1% in 1992. The lower tax rate in
1992 was due primarily to a lesser amount of goodwill amortization, which is
not tax deductible, compared to 1991.
Seasonal Fluctuations
The Company's revenues historically have been subject to some seasonal
fluctuation, particularly in its temporary services business. Demand for the
Company's temporary employees and its payroll requirements (and associated
mark-ups) for certain of its staff leasing clients decline during the
year-end holiday season and periods of bad weather. Correspondingly, demand
for temporary services and the operations of some staff leasing clients,
particularly agricultural and forest products-based companies, increase
during the second and third quarters. Over the past three years, staff
leasing revenues represented an increasing share of total revenues,
diminishing the effect of seasonal fluctuations as staff leasing clients are
engaged in a wide range of industries with varying seasonal demands.
Liquidity and Capital Resources
The Company has financed its operations and met its liquidity needs
primarily from cash flow from operations of $2,905,000 and $3,415,000 during
1992 and 1993, respectively. The principal uses of funds during 1993 were
(i) additional workers' compensation surety deposits required by the States
of Oregon and Maryland of $826,000 and $600,000, respectively, (ii) cash
distributions to shareholders prior to termination of the Company's S
corporation status of $869,000, and (iii) purchase of an office building in
May 1993. The building purchase price of $925,000 was funded in part, on an
interim basis, by drawing on the Company's working capital line of credit,
which was replaced by permanent long-term mortgage financing in the amount of
$693,750 in August 1993.
Capital expenditures for incidental purposes were approximately
$200,000 in 1992 and $360,000 in 1993 and are expected to total approximately
$500,000 for 1994. In addition, the Company hopes to expand its self-insured
workers' compensation and staff leasing program to California and Washington
during the second quarter of 1994. If self-insured status is obtained, the
required surety deposits for the two states are expected to total at least
$2,500,000 to be paid from cash or from other funding sources, potentially
including letters of credit from the Company's lender and surety bonds from
providers of third-party insurance. The Company also has long-term
commitments under non-cancelable operating leases which expire at various
times through 1999. See Note 9 of the Notes to Financial Statements.
The Company has an unsecured bank line of credit for a maximum amount
of $2,000,000, expiring subject to renewal on May 31, 1994. Outstanding
balances against the line of credit accrue interest at the bank's prime rate.
The highest borrowing against the line during 1992 and 1993 was $321,617 and
$1,189,000, respectively. The average balance outstanding against the line
for the year ended December 31, 1992 was $142,000, compared to $59,000 during
1993. There was a zero balance outstanding under the credit line at
December 31, 1992 and 1993. See Note 6 of the Notes to Financial Statements.
On June 18, 1993, the Company completed its underwritten initial public
offering of 1,000,000 shares of its common stock at a public offering price
of $7.00 per share. In July 1993, the underwriters exercised an option to
purchase 150,000 additional shares of common stock on the same terms to cover
over-allotments. Total net proceeds to the Company were $6,828,000 after
deducting underwriting discounts of $644,000 and other expenses incurred in
connection with the offering of $570,000.
In February 1994, the Company acquired the assets of Personnel
Management & Consulting, Inc. ("PMC"), a Maryland corporation, for $270,000,
of which $42,000 was paid in cash and $228,000 was paid in the form of 12,000
shares of common stock of the Company. PMC had unaudited revenues of
approximately $800,000 for the year ended December 31, 1993, primarily from
sales of temporary services provided through three branch offices, one in
each of Salisbury and Easton, Maryland; and in Seaford, Delaware.
In March 1994, the Company acquired the assets of Golden West Temporary
Services ("Golden West"), a California corporation, for $4,514,000 in cash
from working capital. Golden West had total revenues of $24,533,000 for the
year ended December 31, 1993, from the sales of temporary services provided
through four branch offices, one in each of San Jose, Santa Clara, Mountain
View and Fremont, California.
A key part of the Company's business strategy is continued growth
through the expansion of operations at existing offices and the acquisition
of additional personnel-related businesses, both in its existing markets and
in other geographic areas. The Company actively explores proposals for
various acquisition opportunities on an ongoing basis, but there can be no
assurance that any additional transactions will be consummated. The Company
believes that the unused net proceeds of its stock offering, available credit
lines and other sources of financing, and anticipated funds to be generated
from operations will be sufficient in the aggregate to provide funds for
expansion and its working capital needs for the foreseeable future.
Inflation
Inflation generally has not been a significant factor in the Company's
operations during the periods discussed above. The Company has taken into
account the impact of escalating medical and other costs in establishing
reserves for future expenses for self-insured workers' compensation claims in
Oregon and Maryland.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following audited financial statements of Barrett Business
Services, Inc., and related documents are set forth herein on the pages
indicated:
Page
Report of Independent Accountants 20
Balance Sheet at December 31, 1992 and 1993 21
Statement of Operations for the years ended
December 31, 1991, 1992, and 1993 22
Statement of Stockholders' Equity for the
years ended December 31, 1991, 1992, and 1993 23
Statement of Cash Flows for the years ended
December 31, 1991, 1992, and 1993 24
Notes to Financial Statements 25
(b) The following financial statement schedule and report thereon are
set forth herein on the pages indicated:
Report of Independent Accountants on Financial Statement
Schedule
Schedule I - Marketable Securities - Other Investments 39
Other financial statement schedules are omitted because
they are not applicable or not required.
(c) The following pro forma financial information as of
December 31, 1993, is set forth herein on the pages indicated:
Barrett Business Services, Inc.:
Pro Forma Balance Sheet at
December 31, 1993 40
Pro Forma Statement of
Operations for the year
ended December 31, 1993 41
Notes to Pro Forma Financial Statements 42
(d) The following audited financial statements of Golden West Temporary
Services and related documents are set forth herein on the pages
indicated:
Independent Accountants' Report 43
Balance Sheets at December 31,
1993 and 1992 44
Statements of Income for the
years ended December 31,
1993 and 1992 46
Statements of Changes in
Stockholders' Equity for the
years ended December 31,
1993 and 1992 47
Statements of Cash Flows for
the years ended December 31,
1993 and 1992 48
Notes to Financial Statements 50<PAGE>
Report of Independent Accountants
February 7, 1994
To the Stockholders and Board of Directors,
Barrett Business Services, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Barrett Business Services, Inc.
at December 31, 1992 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. 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 of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audits 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Portland, Oregon
<PAGE>
Barrett Business Services, Inc.
Balance Sheet
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1992 1993
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 12 $ 1,127
Marketable securities -- 6,374
Trade accounts receivable, net 4,145 4,954
Prepaid expenses and other 147 145
Deferred tax asset (Note 13) -- 894
Total current assets 4,304 13,494
Intangibles, net (Note 3) 654 294
Property and equipment, net (Notes 4 and 7) 752 1,876
Restricted marketable securities and workers'
compensation deposits (Note 5) 1,469 2,728
Other assets 40 33
$7,219 $18,425
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt (Notes 7 and 11)$221 $123
Income taxes payable (Note 13) -- 79
Due to stockholder (Note 2) 98 --
Accounts payable 226 91
Accrued payroll and related benefits 2,565 3,223
Accrued workers' compensation claim liabilities
(Note 5) 1,337 2,434
Customer safety incentives payable 535 527
Total current liabilities 4,982 6,477
Long-term debt, net of current portion (Notes 7 and 11)292 946
Customer deposits 371 522
5,645 7,945
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, $.01 par value; 7,500 shares
authorized, 3,152 shares issued and
outstanding (Notes 12 and 14) 20 32
Additional paid-in capital 190 8,469
Retained earnings 1,364 1,979
1,574 10,480
$7,219 $18,425
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
Barrett Business Services, Inc.
Statement of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
199119921993
<S> <C> <C> <C>
Revenues:
Temporary services$31,041$34,681$41,755
Staff leasing services16,94945,444 58,512
47,990 80,125 100,267
Cost of revenues:
Direct payroll costs 35,486 59,820 75,171
Payroll taxes and benefits 4,309 7,826 9,911
Workers' compensation (Note 5) 1,958 3,233 4,591
Safety incentives 270 651 598
42,023 71,530 90,271
Gross margin 5,967 8,595 9,996
Selling, general and administrative
expenses 4,708 5,924 6,290
Provision for doubtful accounts 111 79 160
Amortization of intangibles (Note 3) 235 336 370
Income from operations 913 2,256 3,176
Other (expense) income:
Litigation settlement (Note 10) (600)-- --
Interest expense (175) (77) (86)
Interest income 58 70 161
Other, net (31) 26 133
(748) 19 208
Income before provision for income taxes 165 2,275 3,384
Provision for income taxes (Note 13) -- -- 437
Net income $ 165 $ 2,275 $2,947
Unaudited pro forma information (Note 13):
Income before provision for income taxes$ 165$ 2,275 $3,384
Provision for income taxes 67 890 1,324
Net income $ 98 $ 1,385 $2,060
Net income per share $ .05 $ .69 $ .78
Weighted average number of shares 1,994 2,000 2,630
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
Barrett Business Services, Inc.
Statement of Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Additional
Common stock paid-in Retained
Shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990 $ 1,992 $20 $ 182 $ 986 $1,188
Common stock issued 8 -- 8 -- 8
Net income -- -- -- 165
165
Distributions to stockholders -- -- -- (399) (399)
Balance, December 31, 1991 2,000 20 190 752 962
Net income -- -- -- 2,275
2,275
Distributions to stockholders -- -- -- (1,663) (1,663)
Balance, December 31, 1992 2,000 20 190 1,364 1,574
Common stock issued 1,152 12 6,816 -- 6,828
Net income -- -- -- 2,947 2,947
Distributions to stockholders -- -- (869) -- (869)
Reclassification of retained earnings
on issuance of common stock -- -- 2,332 (2,332) --
Balance, December 31, 1993 3,152 $32 $8,469 $1,979 $10,480
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
Barrett Business Services, Inc.
Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1991 1992 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 165 $ 2,275 $ 2,947
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 429 476 530
Loss (gain) on sales of marketable securities 6 (14) (112)
Provision for doubtful accounts 111 79 160
Deferred taxes -- -- (894)
Changes in certain assets and liabilities:
Trade accounts receivable (1,507) (701) (969)
Prepaid expenses and other (10) (88) 2
Accounts payable 186 (25) (135)
Accrued payroll and related benefits 992 620 658
Accrued workers' compensation claim liabilities 643 462 1,097
Customer safety incentives payable 159 307 (8)
Litigation settlement 600 (600) --
Due to stockholder -- -- (98)
Income taxes payable -- -- 79
Customer deposits and other, net 288 114 158
Net cash provided by operating activities 2,062 2,905 3,415
Cash flows from investing activities:
Increase in intangibles through acquisitions (372) (90) (10)
Purchases of fixed assets (205) (201) (1,287)
Proceeds from sales of marketable securities 104 539 8,413
Proceeds from sales of fixed assets -- -- 7
Purchases of marketable securities (106) (1,421) (15,938)
Net cash used by investing activities (579) (1,173) (8,815)
Cash flows from financing activities:
Distributions to stockholders (399) (1,630) (869)
Net decrease in bank line of credit (438) -- --
Proceeds from debt issued 150 -- 752
Payments on long-term debt (635) (276) (196)
Proceeds from issuance of common stock 8 -- 6,828
Net cash provided (used) by financing activities(1,314) (1,906) 6,515
Net increase (decrease) in cash and cash equivalents169 (174) 1,115
Cash and cash equivalents, beginning of period 17 186 12
Cash and cash equivalents, end of period $ 186 $ 12 $1,127
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
1. Summary of Operations and Significant Accounting Policies
Nature of Operations
Barrett Business Services, Inc. (Barrett or the Company), a Maryland
corporation, is engaged in providing temporary staffing and staff leasing
services to a diversified group of customers through a network of branch
offices throughout western Oregon and in Seattle, Washington; Sacramento;
California; and Baltimore, Maryland. Approximately 92% of the Company's
revenue during 1992 and 1993 was attributable to its Oregon operations.
Revenue Recognition
The Company recognizes revenue as the services are rendered by its work
force. Temporary services are engaged by customers to meet short-term
fluctuations in personnel needs. Staff leasing services are normally used
by organizations to satisfy ongoing personnel needs and generally involve
contracts, with a minimum term of one year renewable annually, covering all
employees at a particular work site.
Allowance for Doubtful Accounts
The Company had an allowance for doubtful accounts of $30,000 and $25,000
at December 31, 1992 and 1993, respectively.
Marketable Securities
Marketable securities are stated at cost, which approximates fair market
value. At December 31, 1992 and 1993, marketable securities consisted
primarily of municipal tax anticipation notes and certificates of deposit.
Intangibles
Intangible assets are recorded at cost and are being amortized using the
straight-line method over their estimated useful lives ranging from three
to 15 years.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs are charged to operating expense as incurred, and expenditures
for additions and betterment are capitalized. The cost of assets sold or
otherwise disposed of and the related accumulated depreciation are
eliminated from the accounts and any resulting gain or loss is reflected in
the Statement of Operations.
Depreciation of property and equipment is calculated using either
straight-line or accelerated methods over estimated useful lives ranging
from three to 31.5 years.
Customer Safety Incentives Payable
Safety incentives are paid annually to staff leasing clients if the cost of
workers' compensation claims is less than agreed upon amounts; amounts paid
are based on a percentage of payroll. The Company accrues the amounts
payable under this program on a monthly basis.<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
1. Summary of Operations and Significant Accounting Policies (Continued)
Income Taxes
Effective July 1, 1987, the Company elected to be treated as an S
Corporation under provisions of the Internal Revenue Code. As such,
federal and state income tax regulations provide that the income or losses
of the Company were attributable to its stockholders in their individual
tax returns. Accordingly, no accrual or provision for income taxes is made
in the Company's financial statements for the years ended December 31, 1991
and 1992. Effective April 30, 1993, the Company terminated its S
Corporation status. A pro forma provision for income taxes that would have
been recorded if the Company had been a C Corporation for all periods
presented is provided for comparative purposes in the Statement of
Operations.
Customer Deposits
The Company requires deposits from certain staff leasing customers to cover
a portion of its accounts receivable due from such customers in case of
default.
Cash and Cash Equivalents
The Company considers nonrestricted short-term investments which are highly
liquid, are readily convertible into cash and have original maturities less
than three months to be cash equivalents for purposes of the Statement of
Cash Flows.
Statement of Cash Flows
The Company has recorded the following non-cash transactions:
In September 1992, the Company, for financial reporting purposes, is
deemed to have distributed to its stockholders certain non-cash assets
and liabilities which aggregated a net liability of $23,000. See Note 2.
During 1992, notes receivable from a stockholder were extinguished. See
Note 11.
Interest paid during 1991, 1992 and 1993 did not differ materially from
interest expense.
Income taxes paid by the Company since termination of its S Corporation
status totalled $1,239,600.
Common Stock Split and Change in Authorized Shares
The Company's stockholders approved a 7,968-for-1 split of its common
stock, an increase in authorized common shares and the authorization of
preferred stock which became effective March 25, 1993. All share and
earnings per share amounts have been adjusted to reflect this transaction
for all periods presented. Additionally, the par value of common stock was
changed to $.01 from $10 per share. Common stock and additional paid-in
capital have been adjusted to reflect this change.
Pro Forma Net Income Per Share
Net income per share is computed based on the weighted average number of
common shares outstanding during the period without giving effect to
securities that would otherwise be considered to be common stock
equivalents, because such securities aggregate less than 3% of shares
outstanding and thus are not considered dilutive.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
1. Summary of Operations and Significant Accounting Policies (Continued)
Reclassifications
Certain prior year amounts have been reclassified to conform with 1993
presentation. Such reclassifications had no impact on net income or
stockholders' equity.
2. Acquisitions
Oregon Temporary Services
In January 1991, a company owned by the chief executive officer of the
Company purchased Oregon Temporary Services, Inc. (OTS), a company engaged
in the temporary services business. Of the $300,000 purchase price,
$150,000 was financed through a distribution from the Company to the then
sole stockholder, who is the chief executive officer's spouse, and the
remaining $150,000 was payable under a note. Following the acquisition, OTS
purchased employee services from Barrett and sold these services to
third-party customers.
In November 1991, Barrett began directly servicing certain customers of OTS.
By September 1992, all of the OTS customers were serviced by Barrett and,
therefore, OTS has recognized no further revenues related to the temporary
services business since that time. In September 1992, the Company, for
financial reporting purposes, is deemed to have distributed to its
stockholders cash of $438,800 and other assets and liabilities which
aggregated a net liability of $23,000. Additionally, the Company incurred a
note payable to the stockholders of $98,500 for the purchase of certain
fixed assets related to OTS which had a net book value of $71,400. The
difference between the note payable and the net book value of such assets of
$27,100 was recorded as a distribution to the stockholders. Subsequent to
relinquishing the OTS customers to Barrett, the stockholders invested the
remaining net assets of OTS in another business not in the temporary
services industry. See Note 1-- Statement of Cash Flows.
Because of the relationship between Barrett and OTS and because Barrett
assumed the OTS customers gradually over the period from November 1991
through September 1992 at no cost, the accompanying financial statements as
of and for the years ended December 31, 1991 and 1992 present the accounts
of Barrett and the temporary services business of OTS as if the Company had
purchased OTS in January 1991. As legal entities, OTS and Barrett were not
combined; however, due to the common ownership and commingled operations of
the two entities, combination for financial statement purposes properly
presents the results of operations, cash flows and financial position of the
Company. Transactions between Barrett and OTS from February 1991 through
September 1992 have been eliminated.
Employee Leasing of Oregon
In November and December 1991, the Company acquired substantially all of the
staff leasing customers of Employee Leasing of Oregon, Inc. (ELO). The
Company recorded $95,000 as intangible assets and expensed approximately
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
$155,000 paid to the five ELO stockholders for services rendered in
transition and delivery of the staff leasing customers to Barrett.
Nancy Horn Personnel Agency
On January 1, 1992, the Company purchased substantially all of the assets of
Nancy Horn Personnel Agency (NHPA), a business engaged in the temporary
services business. The Company paid cash for NHPA and accounted for the
acquisition using the purchase method of accounting. The purchase price of
$65,000 was recorded as intangible assets at the date of acquisition.
American Staff Management
In March 1992, the Company paid the stockholder of American Staff
Management, Inc. (ASM) $25,000 for ASM's customer list. The Company
recorded the purchase price as intangible assets.
CDI Corporation-West
In March 1993, the Company acquired a branch office of CDI Corporation-West
in Sacramento, California for $10,000. The purchase was recorded as
intangible assets under the purchase method of accounting.
Pro Forma Results of Operations (Unaudited)
The operating results of each of the above acquisitions are included in the
Company's results of operations from the respective date of its acquisition.
The following unaudited pro forma summary presents the combined results of
operations as if the ELO, NHPA and ASM acquisitions had occurred at the
beginning of 1991, after giving effect to certain adjustments for the
amortization of intangible assets, taxation and cost of capital.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
<TABLE>
<CAPTION>
Years ended December 31,
1991 1992
(Unaudited)
(In thousands, except per
share amounts)
<S> <C> <C>
Revenue $52,812 $80,730
Net income $76 $1,385
Net income per share $.04 $.69
</TABLE>
The pro forma results above have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisitions been made as of that date or of results which may occur in the
future.
3. Intangibles
Intangibles consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1992 1993
<S> <C> <C>
Covenants not to compete $1,215 $1,215
Goodwill 220 220
Customer lists 201 211
1,636 1,646
Less accumulated amortization 982 1,352
$ 654 $ 294
</TABLE>
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
4. Property and Equipment
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1992 1993
<S> <C> <C>
Office furniture and fixtures $ 840 $1,092
Building 394 1,157
Automobiles 48 36
1,282 2,285
Less accumulated depreciation 567 716
715 1,569
Land 37 307
$ 752 $1,876
</TABLE>
Substantially all of the Company's fixed assets serve as security for
long-term debt (see Note 7).
5. Accrued Workers' Compensation Claim Liabilities
During August 1987 and November 1993, the Company became self-insured with
respect to workers' compensation claims for all its employees working or
living in Oregon and Maryland, respectively. The Company has provided
$1,337,000 and $2,434,000 at December 31, 1992 and December 31, 1993,
respectively, as an estimated liability for unsettled workers' compensation
claims. This estimated liability represents management's best estimate
which includes, in part, an evaluation of information provided by the
Company's third-party administrator and its independent actuary. Included
in the claims liabilities are case reserve estimates for reported losses,
plus additional amounts based on projections for incurred but not reported
claims, allocated loss adjustment expenses and anticipated increases in case
reserve estimates. These estimates are continually reviewed and adjustments
to liabilities are reflected in current operations as they become known.
The Company believes that the difference between amounts recorded at
December 31, 1993 for its estimated liability and the possible range of
costs of settling related claims is not material to results of operations;
nevertheless, it is reasonably possible that adjustments required in future
periods would be material to results of operations. The Company has
obtained excess workers' compensation insurance to limit its self-insurance
liability to $300,000 per occurrence ($350,000 for claims after December 31,
1993). The excess insurance provides coverage up to $10 million per
occurrence for claims through December 31, 1993 and unlimited excess
coverage for claims after that date.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
The States of Oregon and Maryland require the Company to maintain specified
investment balances or other financial instruments, which aggregated
$1,300,000 at December 31, 1992 and $2,761,000 at December 31, 1993 to cover
potential claims losses. To partially meet this requirement at December 31,
1993, the Company holds a $300,000 surety bond guaranteed by an irrevocable
standby letter of credit. The investments are included in restricted
marketable securities and workers' compensation deposits in the accompanying
Balance Sheet.
5. Accrued Workers' Compensation Claim Liabilities (Continued)
The workers' compensation expense in the accompanying Statement of
Operations consists of $1,652,000, $2,780,000 and $4,071,000 for
self-insurance expense in Oregon in 1991, 1992 and 1993, respectively, and
$4,000 for Maryland in 1993. Premiums in the insured states were $306,000,
$453,000 and $516,000 for 1991, 1992 and 1993, respectively.
6. Bank Line of Credit
On August 12, 1993, the Company entered into a new bank line of credit which
expires on May 31, 1994. Pursuant to the amended loan agreement, the line
of credit permits total borrowings of up to $2,000,000. The interest rate
on outstanding balances is at the prime rate. The new line of credit is
unsecured. Under the amended loan agreement, the Company is required to
maintain (i) a ratio of total liabilities to tangible net worth of not more
than 1.25 to 1.0, (ii) positive quarterly income before taxes, (iii)
tangible net worth of at least $7,120,000, and (iv) a zero outstanding
balance against the line for a minimum of 60 consecutive days during each
year. The Company is also prohibited from pledging any of its assets other
than existing mortgages on its real property. There were no borrowings
outstanding under the line of credit at December 31, 1992 or 1993.
During the years ended December 31, 1991, 1992 and 1993, the maximum
balances outstanding under the line of credit were $1,248,362, $321,617 and
$1,189,000, respectively, the average balance outstanding was $768,000,
$142,000 and $59,000, respectively, and the weighted average interest rate
during the period was 9.8%, 7.0% and 6.6%, respectively. The weighted
average interest rate during the period is calculated using daily weighted
averages.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1992 1993
<S> <C> <C>
Note payable to bank in monthly
installments of $13,889, plus
interest at prime plus 1.5%
through 1993. Secured by all
assets, except real property, of
the Company. $124 $ --
Mortgage note payable in monthly
installments of $2,781, including
interest at 11%, through 1998, with
a principal payment of $269,174 due
in 1998. Secured by land and
building. 286 283
Mortgage note payable in monthly
installments of $6,730, including
interest at 8.15%, through 2003,
with a principal payment of
$366,633 due in 2003. Secured by
land and building. -- 683
Note to former majority
stockholder. Interest at 12%
payable monthly. Unsecured. See
Note 11. 103 103
513 1,069
Less portion due within one year (221) (123)
$292 $ 946
</TABLE>
Maturities on long-term debt are summarized as follows at
December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
Year ending
December 31,
<S> <C>
1994 $ 123
1995 39
1996 33
1997 36
1998 307
Thereafter 531
$ 1,069
/TABLE
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
8. Savings Plan
On April 1, 1990, the Company established a 401(k) employee savings plan for
the benefit of its eligible employees. Each employee, twenty-one years of
age or older, becomes eligible to participate in the savings plan upon
completion of 1,000 hours of service in any consecutive twelve-month period
following the initial date of employment. The determination of amounts, if
any, of Company contributions to the plan is subject to the sole discretion
of the Company. Participants' interests in Company contributions to the
plan vest over a seven-year period. Company contributions to the plan were
$17,800, $35,000 and $43,574 for the years ended December 31, 1991, 1992
and 1993, respectively.
9. Commitments
Lease Commitments
The Company leases its branch offices under operating lease agreements which
require minimum annual payments as follows (in thousands):
<TABLE>
<CAPTION>
Year ending
December 31,
<S> <C>
1994 $ 249
1995 181
1996 64
1997 41
1998 43
Thereafter 44
Total minimum payments $ 622
</TABLE>
Rent expense for the years ended December 31, 1991, 1992 and 1993 was
approximately $271,000, $313,000 and $295,000, respectively.
10. Litigation Settlement
During 1991, the Company became a defendant in a lawsuit. The plaintiffs
claimed that the termination of their employment by the Company was
unlawful. On May 15, 1992, the Company settled the lawsuit for $600,000.
Accordingly, a provision for the settlement of $600,000 was made in the
accompanying financial statements for the year ended December 31, 1991.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
11. Related Party Transactions
During 1991, 1992 and 1993, the Company recorded revenues of $1,940,000,
$2,249,000 and $2,404,000, respectively, and cost of revenues of $1,724,000,
$2,116,000 and $2,316,000, respectively, for providing services to a company
of which a director of the Company is president and majority stockholder.
At December 31, 1992 and 1993, Barrett had receivables from this company of
$84,000 and $117,000, respectively.
During 1992 and 1993, the Company recorded revenues of $47,000 and $480,000,
respectively, and cost of revenues of $45,000 and $475,000, respectively,
for providing staff leasing services to a company owned by the chief
executive officer, a stockholder. At December 31, 1992 and 1993, Barrett
had recorded a receivable from this company of $114,000 and $35,000,
respectively.
As further described in Note 7, the Company has a note payable to the estate
of the former majority stockholder, who was the late mother of a current
stockholder. The Company was obligated to make annual payments to the
former director and majority stockholder until her death in 1993 in
recognition of her past services and in return for non-competition
covenants. The payments were adjusted annually for increases in the
Consumer Price Index for All Items--U.S. National Average. The Company
accounted for this arrangement as a defined benefit plan. Under the plan,
net pension costs were approximately $40,000 for each of 1991 and 1992.
At December 31, 1993, the chief executive officer of the Company, pursuant
to the approval of a majority of the disinterested outside directors, agreed
to personally guarantee, at no cost to the Company, the repayment of a
$111,000 receivable from an unrelated, insolvent customer. The Company will
exercise this guarantee at such time as the Company determines that further
collection efforts are likely to be ineffective, but not later than December
31, 1995.
A director of the Company is Vice Chairman of the board of directors of the
bank that provides the Company's unsecured working capital line of credit
and certain mortgage financing. In addition to other banking business, the
bank is the Transfer Agent for the Company's common stock. See Notes 6 and
7.
12. Public Stock Offering
In June 1993, the Company completed an initial public offering of 1,000,000
shares of common stock at $7.00 per share. In July 1993, the underwriters
exercised an option to purchase 150,000 additional shares at $7.00 per share
to cover over-allotments. Total net proceeds to the Company were $6,828,000
after deducting the underwriting discount and offering expenses.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
13. Income Taxes
In conjunction with the Company's public offering, the Company terminated
its S Corporation status effective April 30, 1993. Accordingly, unaudited
pro forma income tax information is presented below which would have been
recorded if the Company had been a C Corporation during all periods
presented, based on tax laws in effect during those periods, as calculated
under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109).
The unaudited pro forma provisions for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1991 1992 1993
<S> <C> <C> <C>
Current:
Federal $507 $674 $1,439
State 95 133 284
602 807 1,723
Deferred:
Federal (452) 70 (338)
State (83) 13 (61)
(535) 83 (399)
Total provision $67 $890 $1,324
</TABLE>
The actual provision for income taxes for the first eight months of operation
as a C Corporation (May 1, 1993 to December 31, 1993) is as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Current:
Federal $ 1,110
State 221
1,331
Deferred:
Federal (327)
State (62)
(389)
Provision before cumulative deferred
tax asset 942
Cumulative deferred tax asset (505)
$ 437
</TABLE>
The provision for income taxes for the year ended December 31, 1993 is
offset by recognition of a cumulative net deferred tax asset of $505,000
associated with the termination of the Company's S Corporation status on
April 30, 1993, in accordance with SFAS 109.<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
13. Income Taxes (Continued)
Deferred tax assets (liabilities) are comprised of the following components
(in thousands):
<TABLE>
<CAPTION>
December 31,
1992 1993
(Unaudited)
(Pro Forma)
<S> <C> <C>
Accrued workers' compensation claim liabilities $509 $949
Allowance for doubtful accounts 11 10
Tax depreciation in excess of book depreciation (53) (65)
Capital loss carryforward 28 ---
$495 894
</TABLE>
The pro forma effective tax rate would differ from the U.S. statutory federal
tax rate due to the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1991 1992 1993
<S> <C> <C> <C>
Statutory federal tax rate 34.0 % 34.0 % 34.0 %
State taxes, net of federal benefit 4.1 4.1 4.3
Goodwill amortization 6.9 .7 .5
Jobs credit (5.3) --- ---
Other, net .9 .3 .3
40.6 % 39.1 % 39.1 %
</TABLE>
Upon termination of the Company's S Corporation status, cash distributions
totaling $330,000, representing the estimated tax liabilities of stockholders
on S Corporation earnings from January 1, 1993 through April 30, 1993, were
paid to the stockholders from the undistributed S Corporation retained
earnings. In total, since December 31, 1992, the Company has paid
stockholder distributions of $869,000. The remaining undistributed
S Corporation retained earnings have been reclassified as additional paid-in
capital.
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
14. Stock Incentive Plan
As of March 1, 1993, the Company adopted a stock incentive plan (the Plan)
which provides for stock-based awards to the Company's employees,
non-employee directors and outside consultants or advisers. The Company has
reserved 250,000 shares of common stock for issuance under the Plan. An
award of 2,000 restricted shares was granted under the Plan in June 1993.
The following table summarizes options granted under the Plan during 1993:
<TABLE>
<CAPTION>
Options Range of Prices
<S> <C> <C>
Outstanding at March 1, 1993 --
Options granted 83,250 $7.00 to 9.375
Options exercised --
Options cancelled or expired (3,000)
Outstanding at December 31, 1993 80,250
Available for grant at December 31, 1993 167,750
</TABLE>
The options listed in the table will become exercisable in four equal annual
installments beginning one year after the date of grant.
15. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except pershare amounts)
<S> <C> <C> <C> <C>
Year ended December 31, 1992
Revenue $17,000 $20,333 $22,597 $20,195
Cost of sales 15,123 18,101 20,197 18,109
Pro forma net income 253 408 435 289
Pro forma net income
per share .13 .20 .22 .14
Year ended December 31, 1993
Revenue from services $20,535 $25,386 $28,076 $26,270
Cost of services 18,501 22,931 25,147 23,692
Pro forma net income 389 488
Pro forma net income
per share .19 .22
Net income 702 481
Net income per share .22 2.15
</TABLE>
<PAGE>
Barrett Business Services, Inc.
Notes to Financial Statements
16. Market Information (Unaudited)
The Company's common stock is traded on the National Market System (NASDAQ)
under the symbol BBSI. The following table sets forth the high and low sale
prices of the stock for each quarter from the Company's June 18, 1993 initial
public offering:
<TABLE>
<CAPTION>
1993
High Low
<S> <C> <C>
June 18 through June 30 $ 9.50 $ 7.00
Third quarter 14.25 7.75
Fourth quarter 16.75 13.50
</TABLE>
<PAGE>
Report of Independent Accountants
on Financial Statement Schedule
February 7, 1994
To the Board of Directors and
Stockholders of Barrett Business Services, Inc.
Our audits of the financial statements referred to in our report dated
February 7, 1994 appearing on page 20 of this Annual Report on Form 10-K also
included an audit of the Financial Statement Schedule included in Part II,
Item 8b of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements.
PRICE WATERHOUSE
Portland, Oregon
<PAGE>
Schedule I - Marketable Securities-Other Investments
<TABLE>
<CAPTION>
Approximate
Market Carrying
Issuer Description Shares Cost Value Amount
<S> <C> <C> <C> <C> <C>
Multnomah Co. SD 3, OR Tax Anticipation Notes 2,425,000 $ 2,425,000 $ 2,456,000 $ 2,456,000
Multnomah Co. SD 7, OR Tax Anticipation Notes 1,445,000 1,445,000 1,464,000 1,464,000
Jackson Co., OR Tax Anticipation Notes 850,000 850,000 861,000 861,000
Deschutes Co., OR Tax Anticipation Notes 575,000 575,000 582,000 582,000
Clackamas Co., OR Tax Anticipation Notes 1,000,000 1,000,000 1,011,000 1,011,000
6,295,000 6,295,000 6,374,000 6,374,000
First Interstate Bank of Oregon
Time Deposit 826,000 826,000 830,000 830,000
First Interstate Bank of Oregon
Time Deposit 1,013,000 1,013,000 1,042,000 1,042,000
King Co. SD 415, WA General Obligation Bonds 601,000 601,000 602,000 602,000
State of Oregon Workers' Comp. Deposit 117,000 117,000 117,000 117,000
State of Maryland Workers' Comp. Deposit 58,000 58,000 58,000 58,000
State of Washington Workers' Comp. Deposit 41,000 41,000 41,000 41,000
State of California Workers' Comp. Deposit 38,000 38,000 38,000 38,000
2,694,000 2,694,000 2,728,000 2,728,000
8,989,000 $ 8,989,000 $ 9,102,000 $ 9,102,000
</TABLE>
<PAGE>
BARRETT BUSINESS SERVICES, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1993
<TABLE>
<CAPTION>
BBSI Golden West Pro Forma Pro Forma
Historical Historical Adjustments Combined
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues
Temporary services $ 41,755 $ 24,533 $ --- $ 66,288
Staff leasing services 58,512 --- --- 58,512
100,267 24,533 --- 124,800
Cost of revenues:
Direct payroll costs 75,171 18,075 --- 93,246
Payroll taxes and benefits 9,911 2,206 --- 12,117
Workers' compensation 4,591 686 --- 5,277
Safety incentives 598 --- 598
90,271 20,967 111,238
Gross margin 9,996 3,566 13,562
Selling, general and
administrative expenses 6,290 2,378 (175) 8,493
Provision for doubtful accounts 160 23 183
Amortization of intangibles 370 3 290 663
Income from operations 3,176 1,162 (115) 4,223
Other income (expense):
Interest expense (86) (30) 30 (86)
Interest income 161 5 166
Other, net 133 --- 133
208 (25) 30 213
Income before provision for income taxes 3,384 1,137 (85) 4,436
Provision for income taxes 437 36 333 806
Net income $ 2,947 $ 1,101 $ (418) $ 3,630
Unaudited pro forma information:
Income before provision for $ 3,384 $ 4,436
income taxes
Provision for income taxes 1,324 1,735
Net income $ 2,060 $ 2,701
Net income per share $ 0.78 $ 1.03
Weighted average number of shares 2,630 2,630
</TABLE>
<PAGE>
BARRETT BUSINESS SERVICES, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1993
<TABLE>
<CAPTION>
BBSI Golden West Pro Forma Pro Forma
Historical Historical Adjustments Combined
(In thousands, except per share amounts)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and equivalents $ 1,127 $ 509 $ (1,469) $ 167
Marketable securities 6,374 --- (4,484) 1,890
Trade accounts receivable, net 4,954 2,637 7,591
Prepaid expenses and other 145 57 202
Deferred tax asset 894 --- 894
Total current assets 13,494 3,203 (5,953) 10,744
Intangibles, net 294 30 4,072 4,396
Property and equipment, net 1,876 69 6 1,951
Restricted marketable
securities and workers'
compensation deposits 2,728 --- 2,728
Other assets 33 17 50
18,425 3,319 (1,875) 19,869
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 123 $ --- $ $ 123
Bank line of credit --- 500 (500) ---
Income taxes payable 79 64 143
Accounts payable 91 61 152
Accrued payroll and
related benefits 3,223 636 3,859
Accrued workers' compensation
claims 2,434 --- 2,434
Customer safety incentives payable 527 --- 527
Total current liabilities 6,477 1,261 (500) 7,238
Long-term debt, net of current portion 946 --- 946
Customer deposits 522 --- 522
7,945 1,261 (500) 8,706
Stockholders' equity:
Common stock 32 86 (86) 32
Additional paid-in capital 8,469 --- --- 8,469
Retained earnings 1,979 1,972 (1,289) 2,662
10,480 2,058 (1,375) 11,163
$ 18,425 $ 3,319 $ (1,875) $ 19,869
</TABLE>
* The accompanying notes are an integral part of this financial statement.
<PAGE>
Notes to Pro Forma Financial Statements
Acquisition
In March 1994, the Company acquired the assets of Golden West Temporary
Services ("Golden West"), a California corporation, for $4,514,000 in cash from
working capital. Golden West had total revenues of $24,533,000 for the year
ended December 31, 1993, from the sales of temporary services provided through
four branch offices. The accompanying pro forma balance sheet and statement of
operations assume the acquisition took effect January 1, 1993.
Pro Forma Adjustments
The combined pro forma financial statements reflect the following adjustments:
(i) the purchase price of $4,514,000, paid in cash from working capital, and
the resulting increase in intangibles and equipment of $4,425,000 and $89,000,
respectively, (ii) additional amortization and depreciation expense
attributable to the acquired assets, (iii) elimination of interest expense and
other nonrecurring operating costs, and (iv) the anticipated tax effect of the
additional earnings.
<PAGE>
Board of Directors
Golden West Temporary Services
Santa Clara, California
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the accompanying balance sheets of Golden West Temporary
Services as of December 31, 1993 and 1992, and the related statements of
income, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden West Temporary Services
as of December 31, 1993 and 1992, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
FRANK, RIMERMAN & CO.
San Jose, California
February 14, 1994<PAGE>
GOLDEN WEST TEMPORARY SERVICES
BALANCE SHEETS
December 31, 1993 and 1992
<TABLE>
<CAPTION>
ASSETS
1993 1992
CURRENT ASSETS
<S> <C> <C>
Cash $ 509,270 $ 62,399
Accounts receivable, net of allowance for
doubtful accounts of $20,000 (Notes 2 and 3) 2,630,493 2,913,753
Other receivables 6,378 15,414
Prepaid expenses 56,771 53,216
Refundable income taxes --- 17,968
---
Total current assets 3,202,912 3,062,750
PROPERTY AND EQUIPMENT, at cost (Note 3)
Automobile 7,399 7,399
Office equipment 241,318 217,820
Leasehold improvements 30,969 16,947
279,686 242,166
Less accumulated depreciation and
amortization 210,635 184,405
69,051 57,761
INTANGIBLE ASSETS
Goodwill 63,689 63,689
Less accumulated amortization 34,282 31,090
29,407 32,599
OTHER ASSETS
Insurance deposits 7,633 36,788
Other deposits 9,717 9,717
17,350 46,505
$3,318,720 $3,199,615
</TABLE>
See Notes to Financial Statements
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF INCOME
December 31, 199 and 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
CURRENT LIABILITIES
<S> <C> <C>
Bank borrowings (Note 3) $ 500,000 $ 580,775
Accounts payable 42,177 53,079
Accrued wages 268,151 166,593
Accrued payroll taxes 345,021 260,029
Accrued workers' compensation insurance 19,297 78,225
Other accrued liabilities 22,186 17,273
Income taxes payable 34,000 ---
Deferred income taxes (Note 4) 30,000 30,000
Total current liabilities 1,260,832 1,185,974
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY (Note 6)
Common stock, no par value, 120,000
shares authorized, 101,125 shares
outstanding (100,925 in 1992) 86,129 82,129
Retained earnings 1,971,759 1,931,512
2,057,888 2,013,641
</TABLE> $3,318,720 $3,199,615
See Notes to Financial Statements
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF INCOME
Years Ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
REVENUES (Note 2) $24,532,530 $20,188,422
DIRECT EXPENSES 20,966,949 17,312,174
Gross profit 3,565,581 2,876,248
GENERAL AND ADMINISTRATIVE
EXPENSES
Salaries and related costs 1,814,542 1,386,772
Other 589,283 590,352
2,403,825 1,977,124
Income from operations 1,161,756 899,124
OTHER INCOME (EXPENSE)
Interest income 4,897 3,822
Interest expense (29,893) (15,339)
(24,996) (11,517)
Income before income taxes 1,136,760 887,607
PROVISION FOR INCOME TAXES (Note 4) 35,600 22,500
Net income $1,101,160 $ 865,107
</TABLE>
See Notes to Financial Statements
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
Common Stock
Retained
Shares Amount Earnings
<S> <C> <C> <C>
BALANCE, December 31, 1991 101,125 $75,783 $1,377,926
Net income --- --- 865,107
Repurchase of common stock (600) (1,654) (9,146)
Issuance of common stock to
employee as compensation 400 8,000 ---
Dividends ($3.00 per share) --- --- (302,375)
BALANCE, December 31, 1992 100,925 82,129 1,931,512
Net income --- --- 1,101,160
Issuance of common stock 200 4,000 ---
Dividends ($10.50 per share) --- --- (1,060,913)
BALANCE, December 31, 1993 101,125 $86,129 $1,971,759
</TABLE>
See Notes to Financial Statements
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $1,101,160 $ 865,107
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for doubtful accounts --- 3,190
Depreciation and amortization 29,422 21,176
Loss on disposal of leasehold improvements --- 665
Stock bonus awarded to employee --- 8,000
Change in assets and liabilities:
Accounts receivable 283,260 (1,330,839)
Other receivables 9,036 (14,226)
Prepaid expenses (3,555) (10,032)
Refundable income taxes 17,968 (17,968)
Other assets 29,155 (3,456)
Accounts payable (10,902) 20,264
Accrued expenses 132,535 145,943
Income taxes payable 34,000 (4,745)
Deferred income taxes --- 22,500
Net cash provided by (used in) operating
activities 1,622,079 (294,421)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (37,520) (50,396)
Net cash used in investing activities (37,520) (50,396)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under line of credit (80,775) 480,775
Proceeds from issuance of common stock 4,000 ---
Repurchase of common stock --- (10,800)
Dividends paid (1,060,913) (302,375)
Net cash provided by (used in) financing
activities (1,137,688) 167,600
Net increase (decrease) in cash 446,871 (177,217)
CASH, beginning of year 62,399 239,616
CASH, end of year $ 509,270 $ 62,399
</TABLE>
(continued)
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993 and 1992
(continued)
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<S> <C> <C>
Income taxes paid $ --- $21,176
Interest paid $29,893 $15,339
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
During 1992, the Company awarded a bonus of 400 shares of common stock with a
fair market value of $8,000 to an employee. The fair market value of the stock
was included in the employee's compensation.
See Notes to Financial Statements<PAGE>
GOLDEN WEST TEMPORARY SERVICES
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Significant Accounting Policies
Nature of Business
Golden West Temporary Services (Company) provides temporary and permanent
placement contract labor services to various industries in the San Francisco
Bay Area. The majority of the Company's accounts receivable are from high
technology companies.
Significant Accounting Policies
Depreciation and amortization:
Office equipment and the automobile are depreciated using the double
declining balance method over estimated useful lives of three to seven years.
Leasehold improvements are amortized over the lesser of the original term of
the facility leases or estimated useful lives of the assets. Maintenance and
repairs are charged to expense as incurred.
Goodwill is amortized using the straight-line method over 20 years.
Income taxes:
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109). SFAS 109 calls for measuring the
provisions for income taxes and recognizing deferred tax assets and
liabilities on the balance sheet using the liability method.
Concentration of credit risk:
The Company maintains approximately $40,000 and $108,000, respectively, in
two commercial banks located in California. These cash deposits are secured
by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per bank.
Statements of cash flows:
For purposes of this statement, cash represents bank demand and money market
accounts.
2. Major Customer
During 1993, the Company recognized revenues of approximately $6,900,000 from
one customer, of which $808,000 was outstanding at December 31, 1993. No
major customers existed at December 31, 1992.
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
NOTES TO FINANCIAL STATEMENTS
3. Bank Borrowings
The Company has a bank revolving credit agreement which provides for
borrowings of up to $1,500,000 for general working capital purposes.
Borrowings under this agreement bear interest at the bank's reference rate
(6% at December 31, 1993) and are secured by the Company's accounts
receivable and equipment. The agreement is renewable on April 30, 1994 and
requires the Company to maintain certain financial covenants.
4. Income Taxes
The Company operates for Federal income and California franchise tax purposes
as an S-Corporation. As a result, the Company does not provide for Federal
income taxes, and California franchise taxes are provided for at a 2-1/2% tax
rate (1.5% for 1994 and future years). The stockholders are responsible to
report, at the individual level, their pro rata share of taxable income and
other items affecting taxable income.
The deferred income taxes reflect the differences in the timing of reporting
results of operations for California franchise tax and financial accounting
purposes. Deferred taxes arise principally from differences between the cash
basis California franchise taxable income and the accrual basis pre-tax
accounting income.
The effective rate of 3.1% for 1993 differs from the statutory rate of 2.5%
as a result of the implementation of SFAS 109.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Current $35,600 $ 800
Deferred -- 21,700
$35,600 $22,500
</TABLE>
5. Lease Commitments
The Company leases office space located in Santa Clara, Mountain View, San
Jose, and Fremont, California. These leases are noncancellable operating
leases expiring from December 1994 to December 1997. The Santa Clara lease
contains an option to renew up through December 1998. Rent expense was
approximately $113,000 in 1993 ($123,000 in 1992).
<PAGE>
GOLDEN WEST TEMPORARY SERVICES
NOTES TO FINANCIAL STATEMENTS
5. Lease Commitments (continued)
The following is a schedule of future minimum lease payments as of
December 31, 1993:
<TABLE>
<CAPTION>
<S> <C>
1994 $123,000
1995 97,000
1996 84,000
1997 63,000
1998 ---
$367,000
</TABLE>
6. Incentive Stock Option Agreements
The Company has granted nonqualified incentive stock options to officers and
key employees. Each option allows the holder to purchase one share of the
Company's common stock at the fair market value on the date of grant. Fair
market value is determined by the Board of Directors.
Activity related to incentive stock option agreements is summarized as
follows:
<TABLE>
<CAPTION>
Stock Options Option Price
Outstanding Per Share
<S> <C> <C>
Balance, December 31, 1991 1,200 $18.00
Granted 1,600 $20.00
Balance, December 31, 1992 2,800
Exercised (200) $20.00
Balance, December 31, 1993 2,600 $18.00-$20.00
</TABLE>
Options expire five years from the date of grant and vest over a five year
period. At December 31, 1993, 1,400 options are exercisable (800 options at
December 31, 1992).<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information required by Item 10, Directors and Executive Officers of the
Registrant, is incorporated herein by reference to the Company's definitive
Proxy Statement dated March 18, 1994 ("Proxy Statement"), pages 1-2, under the
heading "Election of Directors" or appears under the heading "Executive
Officers of the Registrant" on page 12 of this report. The information
required by Item 11, Executive Compensation, is incorporated herein by
reference to the Proxy Statement, pages 4-5, under the headings "Compensation
Committee Interlocks and Insider Participation" and "Executive Compensation."
The information required by Item 12, Security Ownership of Certain Beneficial
Owners and Management, is incorporated herein by reference to the Proxy
Statement, pages 2-3, under the heading "Stock Ownership by Principal
Stockholders and Management." The information required by Item 13, Certain
Relationships and Related Transactions, is incorporated herein by reference to
the Proxy Statement, pages 7-8, under the heading "Transactions with Management
and Principal Stockholders."
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. and 2.
The financial statements, financial statement schedules and supplementary
data listed in the index set forth in Item 8 of this report are filed as part
of this report.
(a) 3.
Exhibits are listed in the Exhibit Index beginning on page 55 of this report.
Each management contract or compensatory plan or arrangement required to be
filed as an exhibit to this report is listed under Item 10, "Executive
Compensation Plans and Arrangements and Other Management Contracts," in the
Exhibit Index.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1993.
<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.
BARRETT BUSINESS SERVICES, INC.
(Registrant)
Date: March 22, 1994 By:/s/ William W. Sherertz
William W. Sherertz
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 22nd day of March, 1994.
Signature Title
Principal Executive Officer and Director:
/s/ William W. Sherertz President and Chief Executive
William W. Sherertz Officer and Director
Principal Financial and Accounting Officer
and Director:
/s/ Jack D. Williamson, Jr. Vice President-Finance and
Jack D. Williamson, Jr. Treasurer and Director
Other Directors:
ROBERT R. AMES* Director
Robert R. Ames
JEFFREY L. BEAUDOIN* Director
Jeffrey L. Beaudoin
ANTHONY MEEKER* Director
Anthony Meeker
STANLEY G. RENECKER* Director
Stanley G. Renecker
*By: /s/ Jack D. Williamson, Jr.
Jack D. Williamson, Jr.,
Attorney-in-Fact<PAGE>
EXHIBIT INDEX
Exhibits
2 Asset Purchase Agreement between Golden West
Temporary Services and the registrant dated
March 7, 1994.
3.1 Articles of Amendment and Restatement of the
registrant. Incorporated by reference to
Exhibit 3.1 to the registrant's Registration
Statement on Form S-1 (No. 33-61804) (the
"Form S-1").
3.2 Bylaws of the registrant. Incorporated by
reference to Exhibit 3.2 to the registrant's
Form S-1.
4.1 Loan Agreement between the registrant and First
Interstate Bank of Oregon, N.A., dated August
12, 1993. Incorporated by reference to Exhibit
10 to the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993.
The registrant has incurred other long-term
indebtedness as to which the amount involved is
less than 10 percent of the registrant's total
assets. The registrant agrees to furnish cop-
ies of the instruments relating to such
indebtedness to the Commission upon request.
10 Executive Compensation Plans and Arrangements
and Other Management Contracts.
10.1 1993 Stock Incentive Plan of the registrant as
amended March 8, 1994.
10.2 Form of Indemnification Agreement with each
director of the registrant. Incorporated by
reference to Exhibit 10.8 to the registrant's
Form S-1.
23.1 Consent of Price Waterhouse, independent
accountants.
23.2 Consent of Frank, Rimerman & Co., independent
accountants.
24 Power of Attorney of certain officers and
directors.
_____________
Other exhibits listed in Item 601 of Regulation S-K are
not applicable.<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into on March 7, 1994, by and
between GOLDEN WEST TEMPORARY SERVICES, a California corporation
("Seller"), and BARRETT BUSINESS SERVICES, INC., a Maryland corporation
("Buyer").
WHEREAS, Seller is engaged in providing temporary employment
services and payrolling services to a diversified group of customers.
WHEREAS, Buyer operates a similar business and desires to purchase
from Seller and Seller desires to sell to Buyer, certain assets as
designated herein, all relating to Seller's business (the "Business");
WHEREAS, Buyer and Seller have negotiated the general terms and
conditions that are to govern the sale of said assets; and
WHEREAS, as contemplated in the negotiations, the parties now
desire to set forth certain representations, warranties, covenants and
agreements made as an inducement to the execution and delivery of this
agreement (the "Agreement").
NOW, THEREFORE, Buyer and Seller mutually agree as follows:
1. Purchase and Sale of Assets. Subject to the terms and
conditions and in reliance upon the representations, warranties, covenants
and agreements contained in this Agreement, Seller shall sell, convey,
transfer, assign and deliver to Buyer and Buyer shall purchase all of the
following assets (collectively called the "Assets") of Seller, as of the
Closing Date, as hereinafter defined. The Assets described below in
subparagraphs 1.3 through 1.9 of this paragraph 1, are collectively called
the "Intangibles":
1.1 Equipment. The equipment, furniture, fixtures, automobiles,
computers, and supplies used in connection with the Business, which shall
be limited to those which are set forth on Schedule "1.1," which is
attached hereto, and by this reference incorporated herein (the
"Equipment").
1.2 Leasehold. Those certain leasehold interests and improvements
thereon located at:
3396 Stevens Creek 2930 Patrick Henry Drive
Boulevard, Suite 1 Santa Clara CA 95054
San Jose CA 95117
1398 El Camino Real 39170 Fremont Boulevard
Mountain View CA 94040 Fremont CA 94538
wherein Seller operates its Business, which leasehold improvements are set
forth and described on Schedule "1.2," which is attached hereto, and by
this reference incorporated herein. Copies of the four (4) leases have
been marked as Schedule "1.2(a)," and have been delivered to the Buyer.
Schedule "1.2(a)" is not attached to this Agreement, however, Schedule
"1.2(a)" is incorporated into this Agreement, as though fully set forth
herein (the "Leasehold").
EXHIBIT 2<PAGE>
1.3 Customer Contracts. The originals or copies of all of
Seller's customer contracts wherein Seller provides temporary employees or
payrolling services to its customers (the "Customer Contracts"). A list of
such Customer Contracts is attached hereto, marked as Schedule "1.3," and
by this reference incorporated herein.
1.4 Customer Lists. All customers who did business with Seller
since March 1, 1993, are set forth and listed on Schedule "1.4," attached
hereto, and by this reference incorporated herein (the "Customer Lists").
In addition to the above-referenced Customer Lists, on the Closing Date
Seller shall transfer to Buyer, by electronic means, Seller's complete
Customer Lists and customer information that is stored in Seller's
computers or on disks, which information shall include, without limitation,
all customers who did business with Seller in 1993 and 1994.
1.5 Employee Lists and Files. Seller has two (2) distinctly
different types of employees. One group consists of employees who
currently perform the function of operating the Business of the Seller
("Staff Employees"). The other group of employees are those who perform
services for the customers of Seller in the capacity of a payrolled
employee or a temporary employee ("Temporary Employees"). Reference to
employees, without reference to "staff" or "temporary," shall include both
Staff Employees and Temporary Employees. The following information
relating to the Staff Employees and Temporary Employees shall be
transferred by Seller to Buyer.
(a) On the Closing Date, Seller shall transfer to Buyer, by
electronic means and without limitation, all of the information and data
stored in Seller's computers or on disk regarding the Temporary Employees,
including, specifically, a list of the Temporary Employees, all data from
the Temporary Employees' employment application and the Temporary
Employees' work history ("Electronically Transmitted Temporary Employee
Files").
(b) A written list of all of Seller's Temporary Employees who
received any form of compensation from Seller during the period of
October 1, 1993, through the Closing Date, which list of Temporary
Employees has been marked as Schedule "1.5(b)," and has been delivered to
Buyer. Schedule "1.5(b)" is not attached to this Agreement, however,
Schedule "1.5(b)" is incorporated into this Agreement, as though fully set
forth herein ("Written Temporary Employee List").
(c) All of Seller's Staff Employees are set forth and listed on
Schedule "1.5(c)," attached hereto and by this reference incorporated
herein ("Staff Employee List").
(d) The originals or legible copies of all Staff Employees'
employment applications, complete personnel file and work history while
employed by Seller ("Staff Employee Files").
(e) Seller's Staff Employees' and Temporary Employees' employment
files that are stored off site ("Off Site Files"). The Off Site Files are
currently located in three (3) separate storage units, the location of
which has been disclosed to Buyer, along with delivery of any and all
documents relating to the lease or rental of such storage locations, with
appropriate assignment to Buyer and landlord's consent, if necessary.
Access to the Off Site Files or current files that may become Off Site
Files shall be governed by the provisions of paragraph 8.1(c) of this
Agreement.
1.6 Trade Names, Logos, Etc. All trade names, including,
specifically, "Golden West Temporary Services," trademarks and logos owned
by Seller used in connection with Seller's Business, which are set forth on
Schedule "1.6," which is attached hereto, and by this reference
incorporated herein, and any and all variations thereof.
1.7 Manuals. All of Seller's manuals, written warranties and other similar
documents then in Seller's possession respecting the Assets.
1.8 Books and Records. Legible copies of all of Seller's books,
records, computer programs, and related software, financial statements and
tax returns used in connection with the Business as shall be made available
to Buyer upon reasonable request.
1.9 Goodwill. Seller's goodwill.
1.10 Deposits and Prepaid Items (Transferred). All of Seller's
deposits and prepaid expenses of any kind or nature which are set forth and
described, along with the amounts thereof, on Schedule "1.10" attached
hereto, and by this reference incorporated herein (the "Deposits").
1.11 Other Property. All other property, tangible or intangible,
used in the Business, except the assets described in paragraph 2 below.
2. Assets to be Excluded From Sale. The Assets to be sold under
this Agreement shall not include the following:
2.1 Cash. Cash and cash equivalents.
2.2 Receivables. Those Seller receivables, both internal or
external, that result from Seller's Business accrued for the period ending
on the day prior to the Closing Date, regardless of the billing date and as
more particularly described in paragraph 11.
2.3 Employee Benefits; Pension Plans. Any employee benefit,
health or welfare plan, profit sharing or pension plans of Seller and
policies entered into or issued under the employee benefit, profit sharing
or pension plans.
2.4 Deposits and Prepaid Items (Retained). All of Seller's
Deposits and prepaid expenses of any kind or nature which are not included
or described on Schedule "1.10."
2.5 Workers' Compensation Dividends or Refunds. Dividends or
refunds due to Seller workers' compensation insurance for policies and
activities that ended or occurred on or before December 31, 1993.
Dividends and refunds for workers' compensation insurance policies relating
to activity occurring from January 1, 1994, to the day prior to the Closing
Date.
2.6 Stale Dated Checks. Stale dated checks written by Seller.
2.7 Other Refunds; Dividends. Any and all other dividends or
refunds based on Seller's activity prior to the Closing Date.
3. Other Agreements. At Closing, as hereinafter defined, Seller and Buyer
and others shall execute and deliver to one another the following
agreements:
3.1 Individual Noncompetition Agreement. Seller is bound by the
terms and conditions of a covenant not to compete, as more particularly
described in subparagraph 8.1(b). In addition thereto, Richard H.
Vaccarello, Vincent G. Vaccarello, Ronald D. Van Horsen, Frank C. Amato,
and Lawrence A. Klein, shareholders of Seller (the "Individuals"), at
Closing, shall each have executed and delivered to Buyer a separate
covenant not to compete ("Individual Noncompetition Agreements")
restricting the Individuals' ability to compete with Buyer for two (2)
years after the Closing Date. Copies of the Individual Noncompetition
Agreements are attached hereto, marked as Schedules "3.1(a)," "3.1(b),"
"3.1(c)," "3.1(d)," and "3.1(e)," and by this reference incorporated
herein.
3.2 Employment Agreement. At Closing, as hereinafter defined,
Richard H. Vaccarello and Richard Godard (individually the "Employee" and
collectively the "Employees") and Buyer shall enter into an employment
agreement ("Employment Agreement") wherein Employee shall be employed by
Buyer on a full-time basis subject to the terms and conditions contained
therein. A copy of each Employment Agreement is attached hereto, marked as
Schedules "3.2(a)" and "3.2(b)," respectively, and by this reference
incorporated herein.
4. Closing Date and Transactions at and Subsequent to the Closing
Date.
4.1 Closing Date. The Closing of the sale and purchase of Assets
(the "Closing") shall take place at the office of the Seller on Monday,
March 7, 1994, at 9:00 a.m. The effective date of this Agreement shall be
12:01 a.m., on March 7, 1994, which shall hereafter be referred to as the
"Closing Date."
4.2 Closing Date Obligations.
(a) Seller shall execute and deliver to Buyer such bills of sale,
assignments and other documents and instruments of assignment, transfer and
conveyance, and consents and waivers in such form as shall be satisfactory
to counsel for Buyer, as are necessary to vest in Buyer good and marketable
title to all of the Assets, free and clear of any lien, encumbrance or
security interest.
(b) Seller shall deliver to Buyer possession of the Customer
Lists, Customer Contracts, Electronically Transmitted Temporary Employee
Files, Written Temporary Employee List, Staff Employee Files, and Off Site
Files. Seller shall also deliver the following items that are in Seller's
possession: sales materials, catalogs, brochures, price lists, advertising
and marketing materials and similar materials and other similar documents
respecting the Assets and the Business.
(c) Seller shall execute and deliver to Buyer the assignment of
the Leasehold, as such Leaseholds are described on Schedule "1.2," with
appropriate landlord consents, and the keys to each Leasehold.
(d) Seller, Employees, Individuals, and Buyer shall execute and
deliver any and all such documents, instruments and agreements, including,
specifically, Employment Agreements and the Individual Noncompetition
Agreements among Seller, Employees, Buyer, and Individuals, which are
required to consummate this transaction in accordance with the terms of
this Agreement.
(e) Buyer shall deliver to Seller the full amount of the purchase
price for the Assets as determined pursuant to this Agreement.
(f) Buyer shall deliver to the Individuals the sums set forth in
the Individual Noncompetition Agreements.
(g) Seller shall have terminated its Staff Employees and shall
have paid the Staff Employees their regular compensation on Monday,
March 7, 1994, for the Staff Employees' services through March 6, 1994. On
the Closing Date, Seller shall pay its Staff Employees any and all amounts
that may be due to said Staff Employees for their employment with Seller
which may include vacation time, health benefits, or other accrued
obligations of the Seller to the Staff Employees.
4.3 Obligations Subsequent to the Closing Date.
(a) No later than March 11, 1994, Seller shall pay its payroll
obligations for all of its Temporary Employees for services rendered up to
and including 12:00 midnight, March 6, 1994, by payment to the Temporary
Employees, who have submitted the required time cards by March 11, 1994,
all amounts of compensation, bonuses, incentive payments, fringe benefits,
or any other amount then accrued, whether or not then due (including,
specifically, the fringe benefits referred to as "Holiday Pay" and the
"Service Recognition Program," that are then due to the Temporary Employees
assigned to Seller's customers, Solectron, Inc., G.S.S. Array, and APAQ;
the Holiday Pay and Service Recognition Program obligations that become due
to Temporary Employees after the Closing Date shall be the obligation of
Buyer), and payment of all payroll obligations and the filing of all
returns, including taxes and other direct expenses when such obligations
become due, with quarterly payments and adjustments on or before the due
date for such obligations. Such payroll obligations shall include payment
of wages, benefit payments, vacation, pension contributions, income tax,
withholding, FICA obligations, workers' compensation premiums and costs,
unemployment and other payroll obligations which are the obligation of
Seller directly, or that sum or amount which is withheld from Temporary
Employees' compensation, pursuant to either federal, state or local statute
or law. Seller shall provide Buyer proof of such payment within ten (10)
days after the due date of the return (April 30, 1994) relating to said
payroll obligations and shall afford Buyer an opportunity to inspect its
books and records to verify that said payments were paid in full. Seller's
final payment to its Temporary Employees shall be accompanied with a notice
of termination of employment of said Temporary Employees, as of the day
preceding the Closing Date.
(b) Buyer shall pay certain Temporary Employees of Seller for
services of such Temporary Employees that occurred before the Closing Date,
but for which no Temporary Employees' time card was submitted to Seller by
March 11, 1994. Buyer shall be entitled to the full amount of the account
receivable from Seller's customer as it relates to such Temporary
Employees, including the profit margin.
5. No Assumption of Liabilities; Employee Matters; Prorates; Lease
Obligations.
5.1 No Assumption of Liabilities. Buyer does not assume and shall
not be liable for any obligations or liabilities whatsoever of Seller,
whether known or unknown, for all time, unrelated to the Business or the
Assets. Seller shall be responsible and liable for all liabilities arising
from the Business prior to the Closing Date and Buyer shall be responsible
and liable for all liabilities arising from Buyer's operation of the
Business after the Closing Date.
5.2 Employee Matters. Seller shall be responsible for all wages,
the withholdings, workers' compensation, payroll deductions, benefits and
claims of its Staff Employees and Temporary Employees through the Closing
Date. Any claim or cost associated with or arising from any claim of any
of Seller's Staff Employees or Temporary Employees, from Seller's
termination of any Staff Employee or Temporary Employee, any claim for
unemployment compensation, or any claim arising out of Seller's activities
prior to the Closing Date shall be the responsibility of Seller. Buyer
shall have no obligation to employ any Staff Employee or Temporary Employee
of Seller, but Buyer may interview Seller's current Staff Employees or
Temporary Employees and consider employing them. As a condition precedent
to Buyer employing any person who is or was a Staff Employee or Temporary
Employee of Seller, Seller shall first affirmatively terminate said
employee and provide Buyer with evidence of such termination. The parties
agree that Buyer shall not be deemed a successor employer for any Staff
Employee or Temporary Employee of Seller whether or not hired by Buyer.
5.3 Prorations. Insurance, personal property taxes and
assessments, rents, utility charges, any prepaid items, and similar items,
if applicable, shall be prorated as of the Closing Date. Said prorations
to be based on the number of working days of the relevant period. At the
Closing, Seller shall present to Buyer a statement of prorations, which
shall be adjusted after the Closing by cash payment from one party to the
other due within 30 days of demand.
5.4 Lease Obligations. Buyer shall assume the obligations under
the Leasehold, either by way of assignment and assumption or sublease from
Seller, for office space presently occupied by Seller, which are located
at:
3396 Stevens Creek 2930 Patrick Henry Drive
Boulevard, Suite 1 Santa Clara CA 95054
San Jose CA 95117
1398 El Camino Real 39170 Fremont Boulevard
Mountain View CA 94040 Fremont CA 94538
and described in Schedule "1.2," that arise from and after the Closing
Date, provided said Leasehold is (i) not in default in payment or
performance of any obligations relating to said Leasehold; and (ii)
properly assigned with the consent of the landlord who shall certify that
the Leasehold is not in default, that all obligations have been paid in
full, that there are no deferred obligations not yet due and that Seller
has performed all other acts required of it. If Seller is not released
from liability from the Leasehold for the period after the Closing Date,
Buyer will indemnify and defend the Seller from any liability accruing
after the Closing Date which is not caused by or contributed to by Seller.
6. Purchase Price for the Assets; Consideration for Covenant Not
to Compete; Payment.
6.1 Purchase Price for the Assets. As the purchase price for the
Assets (the "Purchase Price"), Buyer shall pay Seller the sum of the
following amounts:
(a) Equipment. A sum equal to the net book value of the fixed
assets of the Seller, as established by the audited financial statement of
Seller for the year ending December 31, 1993, which financial statement has
been prepared in accordance with generally accepted accounting principles,
consistently applied, and in a manner substantially consistent with prior
financial statements of the Seller, less the net book value of the
Leasehold improvements, as described in Seller's financial statement, plus
adjustments for additions and deletions from January 1, 1994, to the
Closing Date, which have been approved by Buyer. The net book value of the
fixed assets shall not exceed the sum of $100,000.
(b) Leasehold: A sum equal to the net book value of the Leasehold
improvements, as established by the audited financial statement of Seller
for the year ending December 31, 1993, which financial statement has been
prepared in accordance with generally accepted accounting principles,
consistently applied, and in a manner substantially consistent with prior
financial statements of the Seller, plus adjustments for additions and
deletions from January 1, 1994, to the Closing Date, which have been
approved by Buyer. The net book value of the fixed assets shall not exceed
the sum of $100,000.
(c) Intangibles and Goodwill (Other than Covenant Not to Compete):
A sum equal to Four Million Two Hundred Nineteen Thousand Eight Hundred
Sixty-eight Dollars ($4,219,868).
(d) Deposits and Prepaid Items (Transferred). A sum equal to the
total amount of the items listed on Schedule "1.10."
6.2 Consideration for Covenant Not to Compete. As consideration for
Seller's and Individuals' covenants not to compete, as described in
subparagraphs 3.1 and 8.1(b), respectively, of this Agreement, Buyer shall
pay Seller the sum of One Thousand Dollars ($1,000), Individual Richard H.
Vaccarello, the sum of Two Hundred Thousand Dollars ($200,000), and each of
the other Individuals, the sum of One Thousand Dollars ($1,000).
6.3 Allocation of Purchase Price and Other Payments to Seller.
The Purchase Price, which was not specifically allocated in subparagraphs
6.1(a) and 6.1(b), shall be allocated among the various Intangibles. No
portion of the Purchase Price for the Intangibles shall be allocated to the
covenant not to compete and no portion of the amounts payable to Seller and
Individuals for the covenant not to compete shall be allocated to the
Purchase Price for the Intangibles. The above allocation shall occur only
after Buyer has had an opportunity to review all books, records and
Intangibles of Seller and such allocation shall be in accordance with
Buyer's accepted accounting practices.
(a) Each party shall prepare and file with the Internal Revenue
Service Form 8594, setting forth the allocations set forth and established
in subparagraphs 6.1 and 6.2 above. An identical copy of the filled-in
Form 8594, is to be filed with Seller's, Individuals' and Buyer's
respective tax returns for the tax period in which this transaction occurs.
A copy of said Form 8594 is attached hereto, marked as Exhibit "6.3(a),"
and by this reference incorporated herein.
6.4 Payment of Purchase Price. The price of the Assets and the
covenant not to compete shall be paid as follows:
(a) At Closing, Buyer shall pay Seller, in cash, by wire transfer
or certified check, the entire Purchase Price.
(b) At Closing, Buyer shall pay Individuals, in cash, by wire
transfer or certified check, the sums required of Buyer by each Individual
Noncompetition Agreement.
7. Representations and Warranties.
7.1 Seller's Representations and Warranties. Seller represents
and warrants to Buyer as follows:
(a) Organization. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
California, is qualified to do business in each other jurisdiction where
the conduct of its Business or the ownership of its properties requires
such qualification, and has full corporate power, authority and legal right
to carry on its Business as presently conducted, to own and operate its
properties and Assets, and to execute, deliver and perform this Agreement
to sell Assets. Copies of Seller's Articles of Incorporation and Bylaws
have been delivered to Buyer and are complete and correct as at the date
hereof. Seller's minute books, which Buyer has received and reviewed
during Buyer's due diligence, contain a complete and accurate record of all
corporate resolutions and other corporate action of its shareholders and
board of directors.
(b) Corporate Authority. The execution, delivery and performance
by Seller of this Agreement and the consummation of the transaction
contemplated by this Agreement, have been duly and properly authorized by
the board of directors and shareholders of Seller and violates no agreement
between Seller and any third party. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a valid and
binding obligation of Seller, enforceable against Seller in accordance with
its terms. The execution, delivery and performance by Seller of the
Agreement does not contravene any law, regulation, rules or order binding
on it or its Articles of Incorporation or Bylaws and does not contravene
the provisions of or constitute a default under any indenture, mortgage,
contract or other agreement or instrument to which the Seller is a party or
by which the Seller may be bound or affected.
(c) Title to Assets. All of the Assets exist and are in the
possession of Seller. Seller has good and marketable title to all of the
Assets, free and clear of all liens, encumbrances, obligations or security
interests. The sale and transfer of the Assets to Buyer, pursuant to the
terms hereof, will vest in Buyer good and marketable title thereto, free
and clear of all liens, encumbrances, obligations, security interests and
other title defects of any nature whatsoever. Seller has no notice of
violation of any regulation, ordinance, law, order, or requirement relating
to its Business or its Assets.
Seller shall have delivered to Buyer forms of release, termination
or waiver of any lien, encumbrance or security interest that may exist
against the Assets. The forms of release, termination or waiver shall
specifically include Uniform Commercial Code ("UCC") termination statements
or release statements as they relate to the security interest of Comerica
Bank to Seller's Assets.
(d) Financial Statements. The audited balance sheet of the Seller
as at December 31, 1993 (the "December 31, 1993 Balance Sheet"), fairly
presents the financial position of the Seller as at December 31, 1993, and
the audited income statements of the Seller for the years ended
December 31, 1990, 1991, 1992, and 1993 (the "December 31, 1990-93 Income
Statement"), fairly presents the results of operations of the Seller for
the years ended December 31, 1990, 1991, 1992, and 1993, and all statements
have been prepared in accordance with generally accepted accounting
principles, consistently applied, and in a manner substantially consistent
with prior financial statements of the Seller. The December 31, 1993,
Balance Sheet and the December 31, 1993, income statement are referred to
collectively in this Agreement as the "December 31, 1993 Statements." The
unaudited balance sheet and income statement of the Seller as at
January 31, 1994, for the one (1) month period then ended (the "Unaudited
Financial Statements"), fairly present the financial position of the Seller
as at January 31, 1994, and the results of operations for the one (1) month
period then ended and have been prepared in a manner substantially
consistent with the December 31, 1993 Statements. There are no adjustments
that would be required on audit of the Unaudited Financial Statements that
would, individually or in the aggregate, have a material negative effect
upon the Seller's reported financial condition. All activity of Seller is
reported in its financial statements. There are no off financial statement
items and no related party transactions. The Unaudited Financial
Statements have been provided to Buyer at the direction of Seller during
Buyer's due diligence review of Seller's Business. A copy of the Unaudited
Financial Statements are attached hereto, marked as Schedule "7.1(d)," and
by this reference incorporated herein.
(e) No Undisclosed Liabilities; Information. To the best of
Seller's knowledge, after due inquiry the Seller and no property of the
Seller is subject to any material liability or obligation that was required
to be included or adequately reserved against in the December 31, 1993
Statements, the Unaudited Financial Statements or described in the notes
thereto and was not so included, reserved against, or described in accor-
dance with the generally accepted accounting principles applied in the
preparation of such December 31, 1993 Statements or the Unaudited Financial
Statements.
Seller has notified Buyer of any change in the ordinary course of
business and of any governmental complaints, investigations or hearings of
which it has been advised or the institution or settlement of litigation,
and has kept Buyer fully informed of such events.
(f) Absence of Certain Changes in Condition and Affairs. Between
December 31, 1993, and the date of this Agreement, there has not been:
(i) any change in the Assets, earnings, Business, prospects, or
condition (financial or otherwise) of Seller, except changes in the
ordinary course of business, none of which has been materially adverse;
(ii) the incurrence of any liabilities by or on behalf of Seller
other than those liabilities incurred in the ordinary course of business,
none of which has had a materially adverse effect on the Business or
financial condition of Seller;
(iii) any damage, destruction or loss (whether covered by
insurance or not) materially and adversely effecting the Business or
properties of Seller;
(iv) any special bonus or remuneration paid to any officer,
director or Staff Employee of Seller, or any general wage or salary
increase made for the benefit of the Staff Employees of Seller, except as
is paid in Seller's ordinary course of business and except for the
compensation paid to Richard H. Vaccarello, which shall be disclosed to
Buyer and which is set forth on Schedule "7.1(f)(iv)";
(v) the incurrence of any commitment or liability by or on behalf
of Seller not in the ordinary course of business or the making of any
acquisition or purchase by or on behalf of Seller not in the ordinary
course of business;
(vi) any other transaction entered into that has resulted or will
result in the transfer by Seller of Assets;
(vii) any capital transactions that would cause the net book value
of the fixed assets of Seller to exceed the sum of $100,000; or
(viii) a change in accounting methods or practices with respect to
Seller or a revaluation of any of the Assets.
(g) Complete and Authentic Documents and Lists. The Customer
Lists, Customer Contracts and Employee Files are the originals of such
documents and represent all of the documents and instruments relating to
such Customer Lists, Customer Contracts and Employee Files. There are no
other Customer Lists, Customer Contracts and Employee Files which are not
included in the transaction contemplated by this Agreement. The Customer
Lists represent a true and accurate description of every past and present
customer of Seller as it relates to the Business within the last one (1)
year prior to the Closing Date. There are no past or present customers of
Seller, as it relates to the Business within said one (1) year period, that
are not included on the Customer Lists. Seller has no knowledge of any
information indicating that any of the customers of Seller intend to alter
the amount of business they are presently doing with Seller, such as to
have a material and adverse effect on the business.
(h) Assignability; Consents. Each Asset, including, specifically,
the Customer Lists, and Employee Files being transferred herein, is
assignable. All Customer Contracts that are assignable, will be assigned.
The assignment constitutes a legal, valid and binding obligation of Seller
which is enforceable against Seller by Buyer.
Seller has obtained the written consent or waiver of every person
or entity whose consent or waiver is necessary, in the opinion of Buyer's
counsel, for the consummation of any of the transactions contemplated by
this Agreement.
(i) Legal Proceedings; Liabilities; Solvency. Except as disclosed
on Schedule "7.1(i)," there is no litigation, proceeding or investigation
pending or threatened against or relating to Seller or to the Assets of
Seller before any court or any federal, state, municipal or other
government department, commission, board, bureau, agency or instru-
mentality. There is no action, proceeding or investigation pending or
threatened which questions or might question the validity of this Agreement
or any of the transactions contemplated by this Agreement. Since
December 31, 1993, there has not been any material change in the Business
financial condition or results of operations of Seller, nor has there been
any adverse change in the condition of the Assets or relationships with
customers, or any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the value of the Assets or the Business
relationships with Seller's customers. Seller is solvent and there are no
facts, material or information known to Seller that would render Seller
insolvent.
(j) Compliance with Laws. To the best of Seller's knowledge,
after due inquiry, the operation of the Business does not violate any
applicable federal, state or local ordinance, administrative regulation,
restrictive covenant or provision of law. No government approval or filing
or registration with any government authority is required for the making
and performance by Seller of this Agreement.
(k) Labor Matters, Agreements or Claims. Seller is not a party to
any collective bargaining or other labor agreement. The Staff Employees of
Seller are not members of any labor union and there is no current attempt
to encourage or achieve such membership. Temporary Employees may or may
not be labor union members. Except as disclosed on Schedule "7.1(k),"
which is attached hereto and by this reference incorporated herein, there
are no discrimination charges or proceedings pending or, to Seller's
knowledge, threatened before any federal or state agency. Seller warrants
that it has complied with all applicable laws, rules and regulations
related to employment, including the Immigration Reform and Control Act of
1986, as amended, and the Consolidated Omnibus Reconciliation Act, as
amended, those related to wages, hours (including payment of overtime
required by state or federal law), Equal Employment Opportunity, pension
and welfare benefits plans and the payment of state and federal payroll
taxes, including Social Security taxes. There is no pending or threatened
labor disputes, claims, union organizing activity, strike, or work stoppage
affecting the Staff Employees of Seller. As a result of the termination of
the employment of all Staff Employees and Temporary Employees of Seller,
Buyer shall have no liability on or after the Closing Date with respect to
any employment agreements covering the employees of Seller and no liability
arising in connection with the termination of such Staff Employees and
Temporary Employees, including, without limitation, accrued compensation,
vacation pay or fringe benefits, or severance pay; except that Buyer shall
be responsible for Holiday Pay and the Service Recognition Program
obligations that become due after the Closing Date. Prior to Closing,
Seller shall deliver to Buyer a true, accurate, and complete list setting
forth, for each of Seller's Staff Employees and those Temporary Employees
listed on Schedule "1.5(b)," such Staff Employees' and Temporary Employees'
compensation, cumulative time worked for Seller from such Staff Employees'
and Temporary Employees' hire date, and benefits, including accrued
vacation time and sick leave bank as of the Closing Date and each Staff
Employee's and Temporary Employee's current vacation year.
(l) Copyrights, Service Marks and Trade Names. Seller possesses
sufficient copyrights, service marks and trade names or licenses or the
rights to the foregoing to conduct its Business as now operated, with no
conflict with or infringement upon valid copyrights, service marks or trade
names or licenses or rights to the foregoing, of others. Seller's
ownership of such items is free and clear of all liens, encumbrances,
charges or restrictions.
(m) Absence of Defaults. Seller is not in default of any lease,
contract, note, indenture, loan agreement or any other agreement or
arrangement, or any court order which affects the Assets and to which
Seller is a party or by which it is bound or affected, and neither the
execution of this Agreement nor the consummation of any transaction
contemplated by this Agreement will result in any breach or violation of,
acceleration of the maturity of or constitute a default under, any such
lease, contract, note, indenture, loan agreement or agreement or arrange-
ment or any court order. Seller has obtained or will obtain prior to the
Closing Date, the consent or waiver of any person, entity or court not a
party to this Agreement whose consent or waiver is necessary in the opinion
of Buyer's counsel for the consummation of this transaction contemplated by
this Agreement.
(n) Taxes. Seller is and shall be liable and responsible for and
shall pay all income, sales and other federal, state or local taxes payable
as a result of the operation of Seller's Business and the consummation of
the transaction contemplated by this Agreement. Except as disclosed on
Schedule "7.1(n)," which is attached hereto and by this reference incor-
porated herein, Seller has timely filed all federal, state, foreign and/or
local tax returns and tax information returns required to be filed and has
paid all taxes, interest, deficiencies and penalties due and payable with
respect to the income, operation or properties of Seller and has paid or
made provision for the payment of all taxes which have or may have become
due pursuant to such returns or pursuant to any assessment received by
Seller. Seller has made and will make, provision for the payment of all
taxes, whether then due or not, interest payments, deficiencies, and
penalties accruable for the United States or any other taxing authority and
is not delinquent in the payment of any installment or obligation of any
kind or nature of any tax or government charge of any nature whatsoever,
including (by way of illustration and not limitation) all income, sales,
Federal Insurance Contribution Act (FICA) taxes. To the best of Seller's
knowledge, after due inquiry, there are no taxes owed or owing by Seller
which, if not paid by Seller, could or may result in a claim, charge, tax
or assessment being asserted against Buyer under a theory of transferee
liability based on equitable principles, statute or contract. No audit,
examination, inquiry or investigation is presently being conducted or
threatened nor has such occurred within the last three (3) years by any
taxing authority. Seller has withheld (and timely paid to the appropriate
government) proper and accurate amounts from its employees for all periods
in full and in compliance with all tax withholding provisions (including,
without limitation, income, FICA and unemployment and withholdings for all
forms of compensation) of applicable federal, state and local laws.
(o) Absence of Seller's Employment Contracts. There are no
employment agreements or employee benefits other than regular wages and
salaries paid or granted by Seller which have not been disclosed in writing
to Buyer. Since December 31, 1993, Seller has not increased the rate of
compensation or made any bonuses to any Staff Employees or Temporary
Employees, except as is paid in Seller's ordinary course of business or
except as disclosed to Buyer. There are no amounts owing to Seller from
any of the Staff Employees or Temporary Employees or shareholders of Seller
or to any of such Staff Employees or Temporary Employees from Seller.
Seller shall be responsible for payment of all wages, benefits and claims
of its Staff Employees and Temporary Employees, including, but not limited
to, any claim arising out of the transaction contemplated by this
Agreement.
Seller has, as of the Closing Date, terminated all Staff Employees
of Seller. Seller has, as of the date of final payment due to Temporary
Employees, terminated the Temporary Employees effective the day prior to
the Closing Date. Seller shall have complied with all laws regarding
termination of employees, including, specifically, and without limiting the
generality of the foregoing, the Consolidated Omnibus Budget Reconciliation
Act ("COBRA") and the Worker Adjustment and Retraining Notification Act
("WARN Act") and Seller is solely responsible for all liabilities arising
from such termination, including, without limitation, accrued compensation,
vacation pay, fringe benefits and payments to the employees of any benefits
before the Closing Date.
Seller does not maintain a pension, profit sharing or any other
type of qualified retirement plan. No pension plan or trust has been
terminated, which termination could result in the imposition of a lien on
any property of the Seller and there have been no "reportable events" (as
that term is defined in Section 4043 of ERISA) since the effective date of
ERISA; no pension plan or trust has incurred any "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA) whether or
not waived, since the effective date of ERISA; and the required allocations
and contributions to pension plans will not violate Section 415 of the
Code. Buyer will have no liability with respect to any obligation relating
to this paragraph.
Neither the Seller nor any member of a Controlled Group of which
Seller is a member ["Controlled Group" means all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Seller are
treated as a single employer under Section 414(b) or 414(c) of the Code]
nor any pension, profit sharing, 401(k) or any other type of retirement
plan ("Plan") or any of them will (i) engage in any "prohibited trans-
action" as such term is defined in Section 4.06 or Section 2003(a) of
ERISA; (ii) incur any "accumulated funding deficiencies" (as such term is
defined in Section 3.02 of ERISA) whether or not waived; (iii) terminate
any Plan in a manner which could result in the imposition of a lien on any
property of the Seller or any member of the Controlled Group pursuant to
Section 4068 of ERISA; or (iv) violate state or federal securities laws
applicable to any Plan.
(p) Effect of Agreement. The execution, delivery and performance
of this Agreement by Seller in consummation of the transaction contemplated
hereby will not:
(i) violate any provision of law, statute, rule or regulation or
any judgment, order, writ or decree of any court applicable to Seller; or
(ii) result in the breach of or conflict with any term, covenant,
condition or provision of, result in the modification or termination of, or
constitute a default under the Articles of Incorporation or Bylaws of the
Seller; or
(iii) render Seller insolvent when considering all of the assets
and liabilities of Seller; or
(iv) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any material
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, permit, lease, agreement, or other instrument or obligation to
which Seller is a party or by which Seller or the Assets may be bound; or
(v) result in the creation or imposition of any lien of any kind
or nature against the Seller or any of the Assets.
(q) Books of Account. The books of account of Seller reflect all
of the items of income and expense (including accruals) and all assets and
liabilities of Seller, as it relates to the Business, in accordance with
generally accepted accounting principles.
(r) No Omission of Material Fact. No representation or warranty
made in this Agreement by Seller and no document or instrument furnished or
to be furnished to Buyer pursuant to this Agreement or in connection with
the transaction contemplated by this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make statements contained therein not
misleading.
(s) Workers' Compensation. Seller has timely filed all workers'
compensation applications, forms, returns and documents required to be
filed and shall have paid its premiums, charges and assessments that have
accrued, or are due, or may become due under its regular premium payment
schedule. Seller has made provision for payments, after Closing, of
amounts, if necessary, for premiums, claims, costs, expenses, charges, and
assessments that have accrued or may become due after the Closing Date for
activity, claims, adjustments, or accrual before the Closing Date. No
audit, examination or investigation is presently being conducted or
threatened by any carrier or former carrier of Seller's workers'
compensation coverage other than the annual workers' compensation audit.
All information, applications, reports or instruments submitted to Seller's
workers' compensation carrier (past or present) were truthful, accurate and
contained no information that was misleading or omitted from the
information necessary to make the same not misleading to such carrier
regarding issues concerning Seller's experience rating and the status of
Seller's stock ownership and identification of the true owners of such
stock.
(t) Discrimination, Environmental Protections, Occupational Safety
and Other Statutes and Regulations.
(i) To the best of Seller's knowledge, after due inquiry, Seller
is presently and has at all times in the past been in compliance with all
rules, regulations and orders of each federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or
instrumentality with jurisdiction over Seller or Seller's operations on or
off Seller's premises, including, but not limited to, all environmental and
safety laws, rules and regulations with respect to Seller's real and
personal property.
(ii) None of the local, state or federal governments have alleged
that Seller is not in compliance with any law, rule, regulation, or order;
none of the federal Environmental Protection Agency, or state agencies
having jurisdiction over environmental matters, any other state
environmental agency, or the Occupational Safety and Health Administration
("OSHA") is engaged in an investigation of Seller with regard to its
operations on or off of Seller's business premises or the condition of
Seller's business premises.
(iii) Except for small amounts of toner, flux remover and P.C.
board cleaner, which are used in the ordinary course of Seller's Business,
Seller has no knowledge that any Hazardous Substance is or has been used,
treated, stored, disposed of, released, spilled, refined, generated,
manufactured, transported, or otherwise handled on or at any of the
locations where Seller operates its Business ("Location") or any property
adjacent to the Location, or has otherwise come to be located on or under
the Location, and all operations conducted at the Location are in
compliance with all Environmental Laws; to the best of Seller's knowledge,
after due inquiry, no Asbestos-Containing Material is present in any of the
improvements at the Location or is otherwise located thereon, and the
Location and all operations conducted thereon, are in compliance with all
federal and state statutes and regulations relating to Asbestos; and no
underground storage tanks, whether in use, abandoned or decommissioned are
on or under the Location.
(iv) For purposes of this Agreement, the following are defined:
(1) The term "Environmental Laws" means any and all present
federal, state and local laws (whether under common law, statute, rule,
regulation, or otherwise), permits, licenses, ordinances and other
requirements of governmental authorities relating to the protection of
human health or the environment or to any Hazardous Substance. Such laws
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act; Resource Conservation and Recovery Act;
Clean Water Act; Clean Air Act; Hazardous Materials Transportation Act;
Toxic Substances Control Act; Occupational Safety and Health Act; and their
state and local counterparts.
(2) The term "Hazardous Substance" is used in this Agreement in
its very broadest sense, and refers to materials that, because of their
quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a threat or potential hazard to human
health or the environment when stored, used, treated, held, existing,
released, emitted, discharged, generated, processed, manufactured, abated,
removed, disposed of, transported, or otherwise handled. "Hazardous
Substance" shall include, but shall not be limited to, (a) any chemical,
compound, material, mixture, or substance that is now or hereafter defined
or listed in, or otherwise classified pursuant to, any Environmental Laws
as a "hazardous substance," "hazardous material," "hazardous waste,"
"extremely hazardous waste," "toxic waste," "infectious waste," "toxic
substance," "toxic pollutant," or any other formulation intended to define,
list or classify substance by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, or "EP toxicity," and (b) Asbestos, Asbestos-
Containing Material, petroleum, petroleum products, including crude oil and
any fraction thereof, natural gas, natural gas liquids, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and such
synthetic gas).
(u) Insurance. Seller has insurance in force which is described
on Schedule "7.1(u)." Seller is not now liable, nor has it received notice
from any insurance carrier that it will be liable, for any retroactive
premium adjustments. All insurance policies are valid and enforceable in
full force and effect, and all premium payments are current.
(v) Leases. Schedule "1.2(a)" is a true and accurate copy of the
leases or arrangements under which Seller holds or operates any real
property used in the Business, and the leases or agreements under which the
Seller leases, holds or operates any personal property used in its
Business.
The leases are valid, subsisting, in full force and effect, binding
and enforceable in accordance with their terms, there exists no default by
Seller (or event or condition which, with notice or lapse of time, or both
would constitute a default) under the leases or agreements with respect to
any term of the leases. There are no deposits, rent escalations or
deferred obligations on such leases that Seller has not disclosed in this
Agreement. There is no pending or threatened condemnation or similar
proceedings affecting the lease properties included among the purchase
Assets, nor are they the subject of any special assessment, and the Seller
has received no notice that any proceeding or special assessment is pending
or has been proposed.
All leases are bona fide, arms-length transactions. The Lessors of
the above-referenced leases are not parties that are related to the Seller
or Seller's shareholders.
(w) Conduct of Business. Seller has, since October 1993, when
Seller and Buyer commenced negotiations for the purchase of the Business
through the Closing Date:
(i) Conduct of Business. Conducted the business in the usual,
regular and ordinary course, and in substantially the same manner as
previously conducted and maintained and refrained from taking any action
that would make any of the representations or warranties of Seller con-
tained in this Agreement untrue or that would result in any material change
in the business.
(ii) Performance of Contracts. Performed in all material
respects all of the respective obligations under agreements, contracts or
commitments and instruments relating to or affecting the business of
Seller.
(iii) Liability. Refrained from incurring any obligations or
liabilities (absolute or contingent) other than those that are usual and
normal in the ordinary course of business of Seller. The net book value of
the fixed assets of Seller shall not exceed the sum of $100,000.
(iv) Insurance. Maintained all insurance coverage, in force
and effect, (or like policies) on the business and employees of Seller.
(v) Maintain Status Quo. Used its best efforts to preserve
intact the business organization of Seller and kept available the services
of its present employees and preserved its relationship with customers and
others having business relationships with it.
(vi) Accounting. Seller has not changed or modified its
accounting practice or procedure.
(x) Permits, Licenses and Compliance with Applicable Laws.
Seller has all material permits, licenses and approvals of governmental and
administrative authorities to own and lease the Assets and to carry on the
Business as presently conducted, and attached hereto as Schedule "7.1(x),"
is the list of all such permits, licenses and approvals. Seller has deliv-
ered to Buyer copies of all such permits, licenses and approvals. Such
permits, licenses and approvals which are material to the conduct of the
Business and to the best of Seller's knowledge, after due inquiry, are in
full force and effect and no suspension or cancellation of them is pending
nor are such proceedings threatened. Seller is not in default under or in
violation of any respect under any executive, legislative, judicial or
administrative ruling, order, writ, injunction, or decree. Seller, in the
conduct of the Business, is in compliance in all material respects with all
federal, state and local laws, statutes, ordinances and regulations, the
failure to comply with which would have a material adverse effect on the
Business or the Assets, including, but not limited to, those relating to
wages, hours, discrimination of employment, collective bargaining, payment
and withholding of taxes, zoning, occupational, safety and health,
immigration and Environmental Laws.
(y) Brokers and Finders. Seller has employed John Hamachek &
Company as its agent in connection with the transaction contemplated by
this Agreement. Seller shall be obligated to said agent for any and all
claims, costs, fees, or charges by said agent for a brokerage commission,
finder's fee or other like payment, and Seller hereby agrees to indemnify
and defend Buyer against any such claims, costs, fees, or charges.
Seller has not employed any other broker or other finder in connection with
the transaction contemplated by this Agreement and has taken no action that
would give rise to a valid claim against any party for a brokerage
commission, finder's fee or other like payment. Seller hereby agrees to
indemnify and defend Buyer from any claims against Buyer by a broker or
finder asserting a claim by or through the Seller.
(z) Materiality Standard. Seller shall not be in violation of the
above-referenced representations and warranties unless the
misrepresentation is material. A misrepresentation of an individual
representation and warranty is material if it exceeds $5,000.
Misrepresentation of more than one representation and warranty is material
if such misrepresentations are in the aggregate, in excess of $20,000.
7.2 Buyer's Representations and Warranties. Buyer represents and warrants to
Seller as follows:
(a) Organization. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Maryland, is qualified to do business in each other jurisdiction where the
conduct of its business or the ownership of its properties requires such
qualification, and has full corporate power, authority and legal right to
carry on its business as presently conducted.
(b) Corporate Authority. The consummation of the transaction
contemplated by this Agreement will be duly and properly authorized by the
board of directors of Buyer and will violate no agreement between Buyer and
any third party. The execution, delivery and performance by Buyer of this
Agreement does not contravene any law, regulation, rule or order binding on
it or its Articles of Incorporation or Bylaws and will not contravene the
provisions of or constitute a default under any indenture, mortgage,
contract or other agreement or instrument to which the Buyer is a party or
by which the Buyer may be bound or affected.
(c) Effect of Agreement. The execution, delivery and performance
of this Agreement by Buyer and consummation of the transaction contemplated
hereby will not:
(i) violate any provision of law, statute, rule or regulation or
any judgment, order, writ or decree of any court applicable to the Buyer;
or
(ii) result in the breach of or conflict with any term, covenant,
condition or provision of, result in the modification or termination of, or
constitute a default under the Articles of Incorporation or Bylaws of
Buyer; or
(iii) render Buyer insolvent when considering all of the assets and
liabilities of Buyer.
(d) Brokers and Finders. Buyer has not employed any broker or finder
in connection with the transaction contemplated by this Agreement and has
taken no action that would give rise to a valid claim against any party for
a brokerage commission, finder's fee or other like payment. Buyer hereby
agrees to indemnify and defend Seller from any claims against Seller by a
broker or finder asserting a claim by or through the Buyer.
8. Covenants.
8.1 Seller's Covenants. Seller agrees to do all of the following,
unless the Buyer shall otherwise consent in writing:
(a) Payment of Retained Liabilities. Seller covenants that it
shall pay and discharge in full all of its liabilities as they become due
and payable, whether before or after Closing, in accordance with their
terms.
(b) Covenant Not to Compete of Seller; Confidentiality.
(i) For purposes hereof, all confidential information with respect
to the Business (including, without limitation, its trade secrets and
information about the names of Staff Employees and Temporary Employees and
customers) constitute "Company Confidential Information." Seller acknowl-
edges that it had in the past and will continue to have access to Company
Confidential Information, and that improper use or revelation of the same
by it could cause serious injury to the business of Buyer. For two (2)
years following the Closing Date, Seller will not use or disclose to any
other party Company Confidential Information, which shall have come or
shall hereinafter come into its possession, for its own private benefit or,
directly or indirectly, for the benefit of any business which is or may be
similar or competitive with the business of the Buyer, including,
specifically, any business which is involved in any way with the temporary
employment, payrolling services or employee leasing business in the
marketing area of Alameda, San Mateo and Santa Clara Counties of the state
of California ("Restricted Area").
(ii) For two (2) years following the Closing Date, Seller
shall not directly or indirectly own, manage, operate, join, control or
participate in the ownership, management, operation or control of and/or
assist, or be connected in any manner, directly or indirectly, with any
business that is similar to that of Seller's Business being sold to Buyer
herein, including, but not limited to, employee leasing, payrolling
services and the temporary employment business in the Restricted Area
(whether as an officer, director, partner, shareholder, proprietor,
investor, associate, employee, consultant or otherwise), nor shall Seller
divert or attempt to divert from Buyer any past, present or prospective
Staff Employees, Temporary Employees or customers of the Business of the
Buyer or Seller.
(iii) Seller agrees that the forgoing restrictions are
reasonable under the circumstances, considering the fact that Seller is
selling to Buyer the Business; however, if it shall be finally determined
by any court of competent jurisdiction that the scope or duration of the
restrictions is unreasonable, then the court so holding may enforce such
reasonable restrictions as the court deems necessary to protect the rights
and interests of the Buyer to the fullest extent permissible by law.
(iv) In the event that the time for which the obligations of
Seller under this subparagraph 8.1(b) are reduced as a result of any legal
action, claim, request for relief or legislative enactment, the amounts to
be paid, if any, in accordance with subparagraph 6.2 above shall not be
reduced or otherwise modified unless such reduction in time results from
any legal action initiated by Seller.
(v) Seller acknowledges that any violation of the provisions of
this subparagraph 8.1(b) will cause serious and irreparable damage to
Buyer. Seller further acknowledges that it might not be possible to
measure such damages in money. Accordingly, Seller further acknowledges
that, in the event of breach or threatened breach of the provisions of this
subparagraph 8.1(b) Buyer, in addition and as a supplement to such other
rights and remedies, including recovery of money damages, may seek an
injunction or restraining order, restraining Seller from performing any act
in violation of the provisions of this subparagraph 8.1(b).
(vi) Notwithstanding the foregoing provisions to the contrary and
not before one (1) year after the Closing Date, Seller may make a written
request that Buyer modify the terms of the restrictions of this
subparagraph 8.1(b). The written request of Seller shall specifically
describe the proposed activity in which Seller wishes to engage and
describe with particularity the market area within the Restricted Area that
said activity will impact. Seller must obtain the written consent of Buyer
to engage in the proposed activity which otherwise is in violation of this
paragraph 8. Buyer shall not unreasonably withhold consent; provided,
however, Buyer may consider, among others, the following factors in
determining whether or not to consent to Seller's request: (a) Buyer is
engaged in the activity described by Seller; (b) Buyer is planning to
engage in the described activity within the next year; or (c) the described
activity has an adverse impact on the Buyer's business.
(vii) Notwithstanding the foregoing provisions to the contrary,
Seller may purchase shares of publicly traded stock listed on any stock
exchange, including, without limiting the foregoing, the NASDAQ National
Market, of companies which are similar or competitive to the Business of
Buyer provided that Seller does not participate in said companies' policy,
management or operation in any manner whatsoever.
(c) Post Closing Inquires. After the Closing Date, Seller shall
respond and provide all information and documents requested of it in
connection with any inquiries, demands or filing requirements by any and
all court orders, lawfully issued subpoenas or government authorities,
whether federal, state, local, or private, as such inquiries may relate to
Seller's activity prior to the Closing Date. Buyer will permit Seller
access to the Off Site Files in an effort to assist Seller in satisfying
the inquiries. Seller agrees to reimburse Buyer for any out-of-pocket
costs and consequential damages to Buyer as a result of Seller's breach of
this provision.
8.2 Buyer's Covenant. Buyer agrees to do all of the following, at Buyer's
sole cost, unless the Seller shall otherwise consent in writing:
(a) Post Closing Inquiries. After the Closing Date, Buyer shall
respond and provide all information and documents requested of it in
connection with Staff Employee and Temporary Employee matters, as such
inquiries pertain to unemployment taxes, domestic relation matters, credit
checks, and Staff Employee and Temporary Employee work history for those
Staff Employees and Temporary Employees who were employees of Seller and
the information related thereto is part of the Off Site Files.
(b) Maintenance of Off Site Files. Buyer will maintain the Off
Site Files for seven (7) years. Each year Buyer shall be allowed to
dispose of the oldest year thereby always maintaining a minimum of seven
(7) years of Off Site Files. Seller is currently involved in an Internal
Revenue Service audit for tax year 1986 which relates back to 1982. All
Off Site Files have been maintained for that period. Buyer shall be
permitted to dispose of the appropriate years in question upon written
notification from Seller indicating the conclusion of the dispute. Upon
request, Seller will be permitted access to the Off Site Files at such
reasonable times as may be mutually agreed upon by Seller and Buyer.
9. Effect of Survival of Representations and Warranties; Indemnification;
Bulk Sales.
9.1 Effect and Survival of Representations and Warranties by
Seller; Indemnification by Seller; Bulk Sales.
(a) True on Closing Date. The representations and warranties made
by Seller in this Agreement shall be true on the Closing Date.
(b) Survival Past Closing Date. Except as otherwise provided
herein, notwithstanding any investigation by Buyer, the representations and
warranties Seller in this Agreement shall survive for one (1) year and
shall not merge in the performance of any obligation by any party to this
Agreement. Buyer must assert a claim against Seller with respect to such
representations and warranties prior to the expiration of the one (1) year
period, by given notice thereof pursuant to the provisions of subparagraph
9.1(c) hereof, in order for such claim to survive beyond one (1) year.
(c) Indemnification by Seller. Seller shall indemnify Buyer and
hold Buyer harmless, on an after-tax basis, from and against any and all
damages, liens, taxes, assessments, premium charges, obligations,
recoveries, deficiencies, losses, claims, liabilities, demands, charges,
suits, interest, penalties, costs or expenses, whether accrued, contingent
or otherwise (including, but not limited to, court costs and reasonable
attorneys fees) (collectively the "Losses") to which Buyer may be subjected
or to which Buyer may incur arising out of:
(i) any misrepresentation or breach of any of the representations
and warranties of Seller contained herein or any documents, certificates,
schedules or exhibits given or delivered to Buyer by or on behalf of Seller
pursuant to or in connection with this Agreement;
(ii) any other breach of this Agreement by Seller;
(iii) the conduct of the Business prior to and through the Closing
Date; or
(iv) any transferee or successor liability imposed on Buyer by
statute, case law or any other manner whatsoever.
The Buyer shall promptly notify Seller of the existence of any
Losses or other matter to which Seller's indemnification obligation would
apply, and give the Seller a reasonable opportunity to defend the same at
Seller's own expense, and with counsel of Seller's own selection reasonably
satisfactory to Buyer. Buyer shall, at all times, also have the right to
fully participate in the defense, at its own expense. If Seller, within a
reasonable time after that notice, but not later than 15 days, fails to
defend, the Buyer shall have the right, but not the obligation to,
undertake the defense of, and to compromise or settle (exercising
reasonable business judgment) the Losses or other matter on behalf, for the
account, and at the risk, of the Seller.
(d) Bulk Sales Indemnification. It will not be practical to
comply or attempt to comply with the procedures of the Uniform Commercial
Code - Bulk Transfers Law, if applicable, or any similar law of any other
state which may be asserted to be applicable to the transaction con-
templated in this Agreement. Accordingly, to induce Buyer to waive any
requirement for compliance with the procedures of any Bulk Sales Law,
Seller agrees that the indemnity provisions of subparagraph 9.1(c) above,
shall apply to any claim asserted against Buyer arising out of, or
resulting from the failure of Buyer or Seller to comply with or perform,
any actions in connection with, in preparation for, or incident to, the
transactions anticipated in this Agreement which might be required under
the terms and provisions under any Uniform Commercial Code - Bulk Transfers
Law or similar law, or which may be asserted to be applicable.
9.2 Effect and Survival of Representations and Warranties of Buyer;
Indemnification by Buyer.
(a) True on Closing Date. The representations and warranties made
by Buyer in this Agreement shall be true on the Closing Date.
(b) Survival Past Closing. Except as otherwise provided herein,
the representations and warranties of Buyer in this Agreement shall survive
for a period of one (1) year following the Closing Date. Seller must
assert the claim against Buyer with respect to such representations and
warranties prior to the expiration of the survival period by giving notice
thereof pursuant to subparagraph 9.2(c), in order for such claim to survive
beyond one (1) year.
(c) Indemnification by Buyer. Buyer shall indemnify Seller and
hold Seller harmless, on an after-tax basis, from and against any and all
Losses to which Seller may be subjected or which Seller may incur resulting
or arising out of:
(i) any misrepresentation or breach of any of the representations
and warranties of Buyer contained herein or any documents, certificates,
schedules or exhibits given or delivered to Seller by or on behalf of Buyer
pursuant to or in connection with this Agreement.
(ii) any other breach of this Agreement by Buyer; or
(iii) the conduct of the Business after the Closing Date.
The Seller shall promptly notify the Buyer of the existence of any
Losses or other matter to which Buyer's indemnification obligation would
apply, and give the Buyer a reasonable opportunity to defend the same at
Buyer's own expense, and with counsel of Buyer's own selection reasonably
satisfactory to Seller. Seller shall, at all times, also have the right to
fully participate in the defense, at its own expense. If Buyer, within a
reasonable time after that notice, but no later than 15 days, fails to
defend, the Seller shall have the right, but not the obligation to,
undertake the defense of, and to compromise or settle (exercising
reasonable business judgment) the Losses or other matter on behalf, for the
account, and at the risk, of the Buyer.
10. Conditions to Obligations to Close.
10.1 Conditions to Buyer's Obligations to Close. The obligations
of Buyer under this Agreement are subject to the satisfaction, prior to or
at the Closing Date, of each of the following conditions precedent:
(a) Continued Truth of Representations and Warranties. All of the
representations and warranties made by Seller in this Agreement will be
true on the Closing Date.
(b) Performance of Covenants. Either prior to or at Closing Date,
Seller will have performed and complied with all of the covenants,
agreements, obligations and conditions required by this Agreement to be
performed or complied with by Seller by that date.
(c) Authorization and Corporate Documents. The execution and
delivery by Seller of this Agreement, and the transaction contemplated by
this Agreement, will have been duly authorized by the board of directors
and shareholders of Seller as required by law, and Seller will have
delivered to Buyer complete and correct copies, certified by its secretary
or assistant secretary, of all resolutions and any other documents or
instruments affecting such authorization. Buyer shall have been authorized
by the board of directors of Buyer to complete this transaction.
(d) Delivery of Documents. All documents and instruments required
to be delivered to Buyer by Seller at the Closing Date will have been
tendered for delivery to Buyer by Seller.
(e) No Litigation. No litigation will have been commenced or
threatened which would prevent or limit the ability of Buyer or Seller to
consummate the transaction contemplated by this Agreement or any other suit
which, if resolved adversely to such party, would materially and adversely
affect the financial condition, Business, property, Assets, or prospects of
such party.
(f) Consents. All consents, approvals, permits, licenses, and
authorizations of any person, shareholders of Seller, landlord, government
authorities, courts or private agencies, which, in the opinion of counsel
for Buyer, are necessary or appropriate in connection with the consummation
of the transaction contemplated by this Agreement, shall have been obtained
to the satisfaction of Buyer and its counsel.
(g) No Material Adverse Change. There will have occurred no
material adverse change in the Business, business prospects, financial
condition or Assets of the Business from December 31, 1993, through the
Closing Date.
10.2 Conditions to Seller's Obligations to Close. The obligations of
Seller under this Agreement are subject to the satisfaction, prior to or at
the Closing Date, of each of the following conditions precedent:
(a) Continued Truth of Representations and Warranties. All
representations and warranties made by Buyer in this Agreement will be true
on the Closing Date.
(b) Authorization and Corporate Documents. The Closing of the
transaction contemplated by this Agreement, will have been duly authorized
by the board of directors of Buyer and Buyer will have delivered to Seller
complete and correct copies, certified by its secretary or assistant
secretary, of all resolutions and other documents or instruments affecting
such authorizations.
(c) Performance. Either prior to or at the Closing Date, Buyer
will have performed and complied with all of the agreements, obligations
and conditions required by this Agreement to be performed or complied with
by Buyer by that date.
11. Collection of Seller's Accounts Receivable. At Closing, or as soon as
practicable thereafter, Seller will deliver to Buyer a schedule of Seller's
accounts receivable resulting from business accrued for the period ending
on the Closing Date. Buyer will maintain the address where Seller's fees
are currently remitted at 2930 Patrick Henry Drive, Santa Clara, California
95054. For 120 days after the Closing Date, invoices issued by Buyer in
connection with the Business will require remittance to 2930 Patrick Henry
Drive, Santa Clara, California 95054. Upon the expiration of the 120 day
period, Buyer shall have no restriction on the address or post office box
that remittances are to be made in connection with invoices generated from
the Business.
If a remittance received by Seller should include payment for
services after the Closing Date or for services before and after the
Closing Date, Seller shall not negotiate the instrument, but shall, by the
end of the next business day, deliver the instrument to Buyer. Buyer shall
negotiate the instrument, retain the proceeds thereof that were for ser-
vices provided after the Closing Date and remit, by the end of the next
business day, the balance, if any, to Seller for services that were
rendered prior to the Closing Date.
If Buyer shall receive a remittance that includes payment only for
services performed prior to Closing, Buyer shall not negotiate said
instrument, but shall, by the end of the next business day, deliver the
instrument to Seller. On Buyer's receipt of a remittance that includes
payment for services before and after the Closing Date, Buyer shall deposit
the remittance in Buyer's account, retain that portion of the remittance
for invoices generated by Buyer and, by the end of the next business day,
deliver the balance of the remittance to Seller.
If Buyer shall receive a remittance which does not indicate that it
is payment for services before or after the Closing Date, Buyer shall
request the payor to designate the remittance to specific invoices and
Buyer shall than make the appropriate allocation and disburse the proceeds
accordingly. For those remittances that no invoice designation can be
made, the remittance will be applied to the oldest outstanding invoice.
Buyer shall be entitled to an account receivable that is
attributable to services that were rendered by Seller's Temporary Employees
prior to Closing, if Buyer paid the Temporary Employees based on a time
record that was submitted to Buyer after Seller made its final payroll for
Temporary Employees.
For one (1) year after the Closing Date, Buyer will allow Seller
reasonable access at reasonable times to records, computers and equipment
in order for Seller to wind up its accounting, issue appropriate W-2's for
1994, complete payroll reports, financial statements, tax returns, and
monitor its accounts receivable. Buyer will provide space and power for
the computer that Seller sold to Buyer.
12. Miscellaneous.
12.1 Waiver of Conditions. Any of the conditions set forth in
this Agreement may be waived, in whole or in part, by the party for whom
the condition benefits. Any such waiver shall be in writing, and no such
waiver or failure to insist on strict compliance with any covenant,
condition or agreement herein shall operate as a waiver of, or estoppel
with respect to any subsequent or other failure.
12.2 Expenses. Each party shall pay its own fees and expenses
incurred in connection with this Agreement, including, but not limited to,
attorneys and accountants fees, without regard to whether the purchase of
Assets, as contemplated herein, is consummated.
12.3 Further Assurances and Additional Instruments.
(a) Upon the reasonable request of Buyer at any time and from time
to time following the Closing Date, Seller, its officers or directors, or
both, as appropriate, without further consideration shall execute and
deliver to Buyer such further documents or instruments of assignment,
transfer, conveyance, endorsement, direction or authorization as Buyer or
its counsel may reasonably request in order to perfect the title of Buyer,
or its successors and assigns in and to the Assets or otherwise to fulfill
the purpose and intent of this Agreement.
(b) At any reasonable time or times following the Closing Date,
but only to the extent reasonably necessary to the conduct of the
Business, Seller shall allow employees, attorneys, accountants and other
authorized representatives of Buyer free and full access to Seller's books,
records, documents and correspondence, as it relates to the Business, and
shall make the same available to Buyer at a place to be designated by
Buyer.
12.4 Notices. Any notice, request, instruction, or other document
or instrument required or permitted by this Agreement shall be in writing
and shall be given to either Seller or Buyer and shall be deemed to have
been given on the date when such notice, request, instruction, or other
document or instrument is personally delivered or 48 hours after deposited
in the United States Mail, registered or certified, postage prepaid and
addressed to the appropriate party at the address set forth on page 1 of
this Agreement or to such other address as may be given by notice as
provided herein.
12.5 Headings. The underlined paragraph and subparagraph headings
used in this Agreement are for convenient reference only and are not
intended to affect the meaning or construction of any provision of this
Agreement.
12.6 Binding on Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of Buyer, Seller and their respective
successors, heirs, devisees, transferees and assigns.
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
12.8 Arbitration. All disputes between the parties under this
Agreement shall be submitted to binding arbitration in Santa Clara County,
California, and in accordance with the then current Commercial Arbitration
rules of the American Arbitration Association (the "Association").
Notwithstanding the provisions of this paragraph, either party may seek
appropriate injunctive relief in a court of appropriate jurisdiction for
any breach or any threatened breach, of the other party's ongoing
obligations. The nonprevailing party shall bear the expenses, including
attorneys fees and costs, in the arbitration or judicial proceeding, unless
the arbitrator or court determines otherwise. Judgment upon the award
rendered may be entered in any court of competent jurisdiction.
The procedure for arbitration shall be in accordance with the
Association's then existing rules, except that each party may select one
(1) arbitrator, and the two (2) selected arbitrators shall choose a third
arbitrator. If either party fails to select an arbitrator within ten (10)
days after arbitration is sought, or the two (2) arbitrators fail to select
a third arbitrator within 15 days after arbitration is sought, the
Association shall make the selection.
12.9 Entire Agreement; Amendment. This Agreement and the
collateral documents and instruments called for herein to consummate this
transaction and the agreements referred to in paragraph 3, comprise the
entire agreements of the parties and may not be amended or modified, except
by written agreement of the parties. No provision of the aforementioned
agreements may be waived, except in writing, and only in the specific
instance and for the specific purposes for which given.
12.10 Schedules. The schedules attached hereto and referred to
herein are part of this Agreement for all purposes. The terms which are
defined in this Agreement shall have the same meaning when used in the
schedules hereto.
12.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when fully and properly executed, shall be
deemed to be an original.
12.12 Default and Remedies. If any party defaults in the
performance of any term, covenant, condition or obligation under this
Agreement, the nondefaulting party may pursue any and all remedies
available to such party. The rights and remedies provided herein are
cumulative and not exclusive of any other right or remedy provided by law.
12.13 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforcement of any such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive
any provision of law which renders any provision hereof prohibited or
enforceable in any respect.
2.14 Attorneys Fees. In the event it is necessary for any party
hereto to institute a proceeding in connection with this Agreement or
breach thereof, the prevailing party in such proceeding shall be entitled
to reimbursement for its reasonable attorneys costs, expenses and attorneys
fees incurred, including fees incurred on any appeal or review.
12.15 Post-Judgment Attorneys Fees. If the services of an
attorney are required by any party to enforce a judgment rendered in
connection with this Agreement, the judgment creditor shall be entitled to
reasonable attorneys fees, costs and other expenses, and such fees, costs
and expenses shall be recoverable as a separate item. This provision shall
be severable from all other provisions of this Agreement, shall survive any
judgment, and shall not be deemed merged into the judgment.
12.16 Cross Default. Any default under this Agreement shall be
deemed a default under the agreements referred to in paragraph 3; any
default under the agreements referred to in paragraph 3 shall be a default
under this Agreement.
12.17 Gender. In construing this instrument and whenever the
context hereof so requires, the masculine gender includes the feminine and
neuter and the singular includes the plural.
12.18 Public Announcement. Seller and Buyer shall agree as to the
content and the timing of the announcement of this transaction to the
public. Until such time as the parties shall decide to announce the
transaction, all aspects thereof shall remain confidential except as
required to fulfill the obligations of this Asset Purchase Agreement and as
otherwise required by law.
12.19 Counsel. Each party has been represented by its counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law
to the effect that any provision of this Agreement will be interpreted or
construed against the party whose counsel prepared the same.
12.20 No Duress. This Agreement has been negotiated at arms-
length and neither party has acted under economic or other type of threat,
coercion, influence, or duress.
12.21 Time of Essence. Time is expressly declared to be strictly
of the essence of this Agreement and the performance of each and every
provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first herein written.
Seller:
Golden West Temporary Services
By ________________________________
______________________________
Title: ___________________________
Buyer:
Barrett Business Services, Inc.
By ________________________________
William W. Sherertz, President<PAGE>
List of Schedules:
Number
1.1 Equipment
1.2 Leasehold
1.2(a) Leases
1.3 Customer Contracts
1.4 Customer Lists
1.5(b) Written Temporary Employee List
1.5(c) Staff Employee List
1.6 Trade Names, Logos, Etc.
1.10 Deposits and Prepaid Items Transferred
3.1(a) Noncompetition Agreement--Richard H. Vaccarello
3.1(b) Noncompetition Agreement--Vincent G. Vaccarello
3.1(c) Noncompetition Agreement--Ronald D. Van Horsen
3.1(d) Noncompetition Agreement--Frank C. Amato
3.1(e) Noncompetition Agreement--Lawrence A. Klein
3.2(a) Employment Agreement--Richard H. Vaccarello
3.2(b) Employment Agreement--Richard Godard
6.3(a) Form 8594
7.1(d) Unaudited Financial Statements
7.1(f)(iv) Richard H. Vaccarello's Compensation
7.1(i) Legal Proceedings; Liabilities; Solvency
7.1(k) Labor Matters, Agreements or Claims
7.1(n) Taxes
7.1(u) Insurance
7.1(x) Permits, Licenses and Approvals
The above schedules have been omitted from this exhibit. The registrant
agrees to furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.<PAGE>
<PAGE>
BARRETT BUSINESS SERVICES, INC.
1993 STOCK INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Barrett Business Services, Inc.
("Corporation"), hereby establishes the Barrett Business Services, Inc.,
1993 Stock Incentive Plan (the "Plan"), effective as of March 1, 1993,
subject to shareholder approval as provided in Article 18.
1.2 Purpose. The purpose of the Plan is to promote and advance
the interests of Corporation and its shareholders by enabling Corporation
to attract, retain, and reward key employees, directors, and outside
consultants of Corporation and its subsidiaries. It is also intended to
strengthen the mutuality of interests between such employees, directors,
and consultants and Corporation's shareholders. The Plan is designed to
serve these purposes by offering stock options and other equity-based
incentive awards, thereby providing a proprietary interest in pursuing the
long-term growth, profitability, and financial success of Corporation.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following terms
shall have the meanings set forth below:
"Award" means an award or grant made to a Participant of Options,
Stock Appreciation Rights, Restricted Awards, Performance Awards, or Other
Stock-Based Awards pursuant to the Plan.
"Award Agreement" means an agreement as described in Section 6.4.
"Board" means the Board of Directors of Corporation.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context
so requires, any reference to a particular Code section shall be construed
to refer to the successor provision to such Code section.
"Committee" means the committee appointed by the Board to
administer the Plan as provided in Article 3 of the Plan.
"Common Stock" means the $.01 par value Common Stock of Corporation
or any security of Corporation issued in substitution, exchange, or lieu
thereof.
"Consultant" means any consultant or adviser to Corporation or a
Subsidiary
selected by the Committee, who is not an employee of Corporation or a
Subsidiary.
"Continuing Restriction" means a Restriction contained in
Sections 6.5(i), 17.4, 17.5, and 17.7 of the Plan and any other
Restrictions expressly designated by the Committee in an Award Agreement as
a Continuing Restriction.
EXHIBIT 10.1
<PAGE>
"Corporation" means Barrett Business Services, In
corporation, or any successor corporation.
"Deferred Compensation Option" means a Nonqualified Option granted
in lieu of a specified amount of other compensation pursuant to Section 7.8
of the Plan.
"Director Options" means options granted to Non-Employee Board
Directors pursuant to Article 14 of the Plan, including Initial Director
Options and Annual Director Options.
"Disability" means the condition of being permanently "disabled"
within the meaning of Section 22(e)(3) of the Code, namely being unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months. However, the Committee may change the
foregoing definition of "Disability" or may adopt a different definition
for purposes of specific Awards.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute. Where
the context so requires, any reference to a particular section of the
Exchange Act, or to any rule promulgated under the Exchange Act, shall be
construed to refer to successor provisions to such section or rule.
"Fair Market Value" means on any given date, the fair market value
per share of the Common Stock determined as follows:
(a) If the Common Stock is traded on an established securities
exchange, the mean between the reported high and low sale
prices of Common Stock as reported for such day by the
principal exchange on which Common Stock is traded (as
determined by the Committee) or, if Common Stock was not
traded on such date, on the next preceding day on which
Common Stock was traded;
(b) If trading activity in Common Stock is reported in the NASDAQ
National Market System, the mean between the reported high
and low sale prices of Common Stock as reported for such day
by the NASDAQ or, if Common Stock trades were not reported
on such date, on the next preceding day on which Common
Stock trades were reported by the NASDAQ;
(c) If trading activity in Common Stock is reported in the NASDAQ
Bid and Asked Quotations, the mean between the bid price and
asked price quote for such day as reported by the NASDAQ or,
if there are no such quotes for Common Stock for such date,
on the next preceding day for which bid and asked price
quotes for Common Stock were reported by NASDAQ; or
(d) If there is no market for Common Stock or if trading activities
for Common Stock are not reported in one of the manners
described above, the fair market value shall be as
determined by the Committee.
"Incentive Stock Option" or "ISO" means any Option granted
pursuant to the Plan that is intended to be and is specifically designated
in its Award Agreement as an "incentive stock option" within the meaning of
Section 422 of the Code.
"Non-Employee Board Director" means a member of the Board who is
not an employee of Corporation or any Subsidiary.
"Non-Employee Subsidiary Director" means a member of the board of
directors of a Subsidiary who is neither an employee of Corporation or a
Subsidiary nor a member of the Board.
"Nonqualified Option" or "NQO" means any Option, including a
Deferred Compensation Option, granted pursuant to the Plan that is not an
Incentive Stock Option.
"Option" means an ISO, an NQO, a Deferred Compensation Option, or a
Director Option.
"Other Stock-Based Award" means an Award as defined in
Section 11.1.
"Participant" means an employee or a Consultant of Corporation or a
Subsidiary, a Non-Employee Board Director, or a Non-Employee Subsidiary
Director who is granted an Award under the Plan.
"Performance Award" means an Award granted pursuant to the
provisions of Article 10 of the Plan, the Vesting of which is contingent on
performance attainment.
"Performance Cycle" means a designated performance period pursuant
to the provisions of Section 10.3 of the Plan.
"Performance Goal" means a designated performance objective
pursuant to the provisions of Section 10.4 of the Plan.
"Plan" means this Barrett Business Services, Inc., 1993 Stock
Incentive Plan, as set forth herein and as it may be hereafter amended and
from time to time.
"Reporting Person" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"Restricted Award" means a Restricted Share or a Restricted Unit
granted pursuant to Article 9 of the Plan.
"Restricted Share" means an Award described in Section 9.1(a) of
the Plan.
"Restricted Unit" means an Award of units representing Shares
described in Section 9.1(b) of the Plan.
"Restriction" means a provision in the Plan or in an Award
Agreement which limits the exercisability or transferability, or which
governs the forfeiture, of an Award or the Shares, cash, or other property
payable pursuant to an Award.
"Retirement" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries on or after age 65, or
such earlier retirement date as approved by the Committee for purposes of
the Plan;
(b) For Participants who are Non-Employee Board Directors or
Non-Employee Subsidiary Directors, retirement from the applicable board of
directors after attaining the maximum age (if any) specified in the
articles of incorporation or bylaws of the applicable corporation; or
(c) For Participants who are Consultants, termination of service
as a Consultant after attaining a retirement age specified by the Committee
for purposes of an Award to such Consultant.
However, the Committee may change the foregoing definition of "Retirement"
or may adopt a different definition for purposes of specific Awards.
"Share" means a share of Common Stock.
"Stock Appreciation Right" or "SAR" means an Award to
benefit from the appreciation of Common Stock granted pursuant to the
provisions of Article 8 of the Plan.
"Subsidiary" means a "subsidiary corporation" of
Corporation, within the meaning of Section 425 of the Code, namely any
corporation in which Corporation directly or indirectly controls 50 percent
or more of the total combined voting power of all classes of stock having
voting power.
"Vest" or "Vested" means:
(a) In the case of an Award that requires
exercise, to be or to become immediately and fully
exercisable and free of all Restrictions (other than
Continuing Restrictions);
(b) In the case of an Award that is subject to
forfeiture, to be or to become nonforfeitable, freely
transferable, and free of all Restrictions (other than
Continuing Restrictions);
(c) In the case of an Award that is required to
be earned by attaining specified Performance Goals, to
be or to become earned and nonforfeitable, freely
transferable, and free of all Restrictions (other than
Continuing Restrictions); or
(d) In the case of any other Award as to which
payment is not dependent solely upon the exercise of a
right, election, exercise, or option, to be or to
become immediately payable and free of all Restrictions
(except Continuing Restrictions).
2.2 Gender and Number. Except where otherwise indicated by
the context, any masculine or feminine terminology used in the Plan shall
also include the opposite gender; and the definition of any term in
Section 2.1 in the singular shall also include the plural, and vice versa.
ARTICLE 3
ADMINISTRATION
3.1 General. The Plan shall be administered by a Committee
composed as described in Section 3.2.
3.2 Composition of the Committee. The Committee shall be
appointed by the Board and shall consist of not less than a sufficient
number of Non-Employee Board Directors so as to qualify the Committee to
administer the Plan as contemplated by Rule 16b-3 under the Exchange Act.
The Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by
the Board. In the event that the Committee shall cease to satisfy the
requirements of Rule 16b-3, the Board shall appoint another Committee
satisfying such requirements.
3.3 Authority of the Committee. The Committee shall have
full power and authority (subject to such orders or resolutions as may be
issued or adopted from time to time by the Board) to administer the Plan in
its sole discretion, including the authority to:
(a) Construe and interpret the Plan and any Award
Agreement;
(b) Promulgate, amend, and rescind rules and
procedures relating to the implementation of the Plan;
(c) Select the employees, Non-Employee Subsidiary
Directors, and Consultants who shall be granted Awards;
(d) Determine the number and types of Awards to
be granted to each such Participant;
(e) Determine the number of Shares, or Share
equivalents, to be subject to each Award;
(f) Determine the option price, purchase price,
base price, or similar feature for any Award; and
(g) Determine all the terms and conditions of all
Award Agreements, consistent with the requirements of
the Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, shall
be final, conclusive, and binding on all Participants.
3.4 Action by the Committee. A majority of the members of
the Committee shall constitute a quorum for the transaction of business.
Action approved by a majority of the members present at any meeting at
which a quorum is present, or action in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
3.5 Delegation. Notwithstanding the foregoing, the
Committee may delegate to one or more officers of Corporation the authority
to determine the recipients, types, amounts, and terms of Awards granted to
Participants who are not Reporting Persons.
3.6 Liability of Committee Members. No member of the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan, any Award, or any Participant.
3.7 Costs of Plan. The costs and expenses of administering
the Plan shall be borne by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The Plan is effective March 1,
1993, subject to approval by Corporation's shareholders as provided in
Article 18. The Plan shall remain in effect until Awards have been granted
covering all the available Shares or the Plan is otherwise terminated by
the Board. Termination of the Plan shall not affect outstanding Awards.
4.2 Shares Subject to the Plan. The shares which may be
made subject to Awards under the Plan shall be Shares of Common Stock,
which may be either authorized and unissued Shares or reacquired Shares.
No fractional Shares shall be issued under the Plan. Subject to adjustment
pursuant to Article 15, the maximum number of Shares for which Awards may
be granted under the Plan shall be 400,000. If an Award under the Plan is
canceled or expires for any reason prior to having been fully Vested or
exercised by a Participant or is settled in cash in lieu of Shares or is
exchanged for other Awards, all Shares covered by such Awards shall be made
available for future Awards under the Plan.
ARTICLE 5
ELIGIBILITY
5.1 Employees and Non-Employee Subsidiary Directors.
Officers and other key employees of Corporation and its Subsidiaries
(including employees who may also be directors of Corporation or a
Subsidiary), Consultants, and Non-Employee Subsidiary Directors who, in the
Committee's judgment, are or will be contributors to the long-term success
of Corporation shall be eligible to receive Awards under the Plan.
5.2 Non-Employee Board Directors. All Non-Employee Board
Directors shall be eligible to receive Director Options pursuant to Article
14 of the Plan.
ARTICLE 6
AWARDS
6.1 Types of Awards. The types of Awards that may be
granted under the Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by
Article 8 of the Plan;
(c) Restricted Awards governed by Article 9 of
the Plan;
(d) Performance Awards governed by Article 10 of
the Plan;
(e) Other Stock-Based Awards or combination
awards governed by Article 11 of the Plan; and
(f) Director Options governed by Article 14 of the Plan.
In the discretion of the Committee, any Award (other than a Director
Option) may be granted alone, in addition to, or in tandem with other
Awards under the Plan.
6.2 General. Subject to the limitations of the Plan, the
Committee may cause Corporation to grant Awards to such Participants, at
such times, of such types, in such amounts, for such periods, with such
option prices, purchase prices, or base prices, and subject to such terms,
conditions, limitations, and restrictions as the Committee, in its
discretion, shall deem appropriate. Awards may be granted as additional
compensation to a Participant or in lieu of other compensation to such
Participant. A Participant may receive more than one Award and more than
one type of Award under the Plan.
6.3 Nonuniform Determinations. The Committee's
determinations under the Plan or under one or more Award Agreements,
including without limitation, (a) the selection of Participants to receive
Awards, (b) the type, form, amount, and timing of Awards, (c) the terms of
specific Award Agreements, and (d) elections and determinations made by the
Committee with respect to exercise or payments of Awards, need not be
uniform and may be made by the Committee selectively among Participants and
Awards, whether or not Participants are similarly situated.
6.4 Award Agreements. Each Award shall be evidenced by a
written Award Agreement between Corporation and the Participant. Award
Agreements may, subject to the provisions of the Plan, contain any
provision approved by the Committee.
6.5 Provisions Governing All Awards. All Awards shall be
subject to the following provisions:
(a) Alternative Awards. If any Awards are
designated in their Award Agreements as alternative to
each other, the exercise of all or part of one Award
automatically shall cause an immediate equal (or pro
rata) corresponding termination of the other
alternative Award or Awards.
(b) Rights as Shareholders. No Participant shall
have any rights of a shareholder with respect to Shares
subject to an Award until such Shares are issued in the
name of the Participant.
(c) Employment Rights. Neither the adoption of
the Plan nor the granting of any Award shall confer on
any person the right to continued employment with
Corporation or any Subsidiary or the right to remain as
a director of or a Consultant to Corporation or any
Subsidiary, as the case may be, nor shall it interfere
in any way with the right of Corporation or a
Subsidiary to terminate such person's employment or to
remove such person as a Consultant or as a director at
any time for any reason, with or without cause.
(d) Nontransferable. Each Award (other than
Restricted Shares after they Vest) shall not be
transferable otherwise than by will or the laws of
descent and distribution and shall be exercisable (if
exercise is required) during the lifetime of the
Participant, only by the Participant or, in the event
the Participant becomes legally incompetent, by the
Participant's guardian or legal representative.
(e) Termination of Employment. The terms and
conditions under which an Award may be exercised, if at
all, after a Participant's termination of employment or
service as a Non-Employee Subsidiary Director or a
Consultant shall be determined by the Committee and
specified in the applicable Award Agreement.
(f) Change in Control. The Committee, in its
discretion, may provide in any Award Agreement that in
the event of a change in control of Corporation (as the
Committee may define such term in the Award Agreement),
as of the date of such change in control:
(i) All, or a specified portion of,
Awards requiring exercise shall become fully
and immediately exercisable, notwithstanding
any other limitations on exercise;
(ii) All, or a specified portion of,
Awards subject to Restrictions shall become
fully Vested; and
(iii) All, or a specified portion of,
Awards subject to Performance Goals shall be
deemed to have been fully earned.
Unless the Committee specifically provides otherwise in
the change in control provision for a specific Award
Agreement, Awards shall become exercisable, become
Vested, or become earned as of a change in control date
only if, or to the extent, such acceleration in the
exercisability, Vesting, or becoming earned of the
Awards does not result in an "excess parachute payment"
within the meaning of Section 280G(b) of the Code. The
Committee, in its discretion, may include change in
control provisions in some Award Agreements and not in
others, may include different change in control
provisions in different Award Agreements, and may
include change in control provisions for some Awards or
some Participants and not for others.
(g) Conditioning or Accelerating Benefits. The
Committee, in its discretion, may include in any Award
Agreement a provision conditioning or accelerating the
Vesting of an Award or the receipt of benefits pursuant
to an Award, either automatically or in the discretion
of the Committee, upon the occurrence of specified
events including, without limitation, a change in
control of Corporation (subject to the foregoing
paragraph (f)), a sale of all or substantially all the
property and assets of Corporation, or an event of the
type described in Section 15 of this Plan.
(h) Payment of Purchase Price and Withholding.
The Committee, in its discretion, may include in any
Award Agreement a provision permitting the Participant
to pay the purchase or option price, if any, for the
Shares or other property issuable pursuant to the
Award, or the Participant's federal, state, or local
tax, or tax withholding, obligation with respect to
such issuance in whole or in part by any one or more of
the following:
(i) By delivering previously owned
Shares (including Restricted Shares, whether
or not vested);
(ii) By surrendering outstanding other
Vested Awards under the Plan denominated in
Shares or in Share equivalent units;
(iii) By reducing the number of Shares
or other property otherwise Vested and
issuable pursuant to the Award;
(iv) By delivering to Corporation a
promissory note payable on such terms and
over such period as the Committee shall
determine;
(v) By delivery (in a form approved by
the Committee) of an irrevocable direction to
a securities broker acceptable to the
Committee:
(A) To sell Shares subject to
the Option and to deliver all or a
part of the sales proceeds to
Corporation in payment of all or a
part of the option price and taxes
or withholding taxes attributable
to the issuance; or
(B) To pledge Shares subject
to the Option to the broker as
security for a loan and to deliver
all or a part of the loan proceeds
to Corporation in payment of all or
a part of the option price and
taxes or withholding taxes
attributable to the issuance; or
(vi) In any combination of the
foregoing or in any other form approved by
the Committee.
If Restricted Shares are surrendered in full or partial
payment of the purchase or option price of Shares
issuable under an Award, a corresponding number of the
Shares issued upon exercise of the Award shall be
Restricted Shares subject to the same Restrictions as
the surrendered Restricted Shares. Shares withheld or
surrendered as described above shall be valued based on
their Fair Market Value on the date of the transaction.
Any Shares withheld or surrendered with respect to a
Reporting Person shall be subject to such additional
conditions and limitations as the Committee may impose
to comply with the requirements of the Exchange Act.
(i) Reporting Persons. With respect to all
Awards granted to Reporting Persons:
(i) Awards requiring exercise shall not
be exercisable until at least six months
after the date the Award was granted, except
in the case of the death or Disability of the
Participant; and
(ii) Shares issued pursuant to any
other Award may not be sold by the
Participant for at least six months after
acquisition, except in the case of the death
or Disability of the Participant;
provided, however, that (unless an Award Agreement
provides otherwise) the limitation of this
Section 6.5(i) shall apply only if or to the extent
required by Rule 16b-3 under the Exchange Act. Award
Agreements for Awards to Reporting Persons shall also
comply with any future restrictions imposed by such
Rule 16b-3.
(j) Service Periods. At the time of granting
Awards, the Committee may specify, by resolution or in
the Award Agreement, the period or periods of service
performed or to be performed by the Participant in
connection with the grant of the Award.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may
be in the form of Incentive Stock Options or Nonqualified Options
(including Deferred Compensation Options and Director Options). The grant
of each Option and the Award Agreement governing each Option shall identify
the Option as an ISO or an NQO. In the event the Code is amended to
provide for tax-favored forms of stock options other than or in addition to
Incentive Stock Options, the Committee may grant Options under the Plan
meeting the requirements of such forms of options.
7.2 General. Options shall be subject to the terms and
conditions set forth in Article 6 and this Article 7 and Award Agreements
governing Options shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee
shall deem desirable.
7.3 Option Price. Each Award Agreement for Options shall
state the option exercise price per Share of Common Stock purchasable under
the Option, which shall not be less than:
(a) $.01 per share in the case of a Deferred
Compensation Option;
(b) 75 percent of the Fair Market Value of a
Share on the date of grant for all other Nonqualified
Options (except Director Options); or
(c) 100 percent of the Fair Market Value of a
Share on the date of grant for all Incentive Stock
Options.
7.4 Option Term. The Award Agreement for each Option shall
specify the term of each Option, which may be unlimited or may have a
specified period during which the Option may be exercised, as determined by
the Committee.
7.5 Time of Exercise. The Award Agreement for each Option
shall specify, as determined by the Committee:
(a) The time or times when the Option shall
become exercisable and whether the Option shall become
exercisable in full or in graduated amounts based on:
(i) continuation of employment over a period specified
in the Award Agreement, (ii) satisfaction of
performance goals or criteria specified in the Award
Agreement, or (iii) a combination of continuation of
employment and satisfaction of performance goals or
criteria;
(b) Such other terms, conditions, and
restrictions as to when the Option may be exercised as
shall be determined by the Committee; and
(c) The extent, if any, that the Option shall
remain exercisable after the Participant ceases to be
an employee, Consultant, or director of Corporation or
a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the time when an Option becomes
exercisable shall be accelerated or otherwise modified (i) in the event of
the death, Disability, or Retirement of the Participant, or (ii) upon the
occurrence of a change in control of Corporation. The Committee may, at
any time in its discretion, accelerate the time when all or any portion of
an outstanding Option becomes exercisable.
7.6 Special Rules for Incentive Stock Options. In the case
of an Option designated as an Incentive Stock Option, the terms of the
Option and the Award Agreement shall conform with the statutory and
regulatory requirements specified pursuant to Section 422 of the Code, as
in effect on the date such ISO is granted. ISOs may be granted only to
employees of Corporation or a Subsidiary. ISOs may not be granted under
the Plan after ten years following the date specified in Section 4.1,
unless the ten-year limitation of Section 422(b)(2) of the Code is removed
or extended.
7.7 Restricted Shares. In the discretion of the Committee,
the Shares issuable upon exercise of an Option may be Restricted Shares if
so provided in the Award Agreement for the Option.
7.8 Deferred Compensation Options. The Committee may, in
its discretion, grant Deferred Compensation Options with an option price
less than Fair Market Value to provide a means for deferral to future dates
of compensation otherwise payable to a Participant. The option price shall
be determined by the Committee subject to Section 7.3(a) of the Plan. The
number of Shares subject to a Deferred Compensation Option shall be
determined by the Committee, in its discretion, by dividing the amount of
compensation to be deferred by the difference between the Fair Market Value
of a Share on the date of grant and the option price of the Deferred
Compensation Option. Amounts of compensation deferred with Deferred
Compensation Options may include amounts payable under Awards granted under
the Plan or under any other compensation program or arrangement of
Corporation as permitted by the Committee. The Committee shall grant
Deferred Compensation Options only if it reasonably determines that the
recipient of such an Option is not likely to be deemed to be in
constructive receipt for income tax purposes of the income being deferred.
7.9 Reload Options. The Committee, in its discretion, may
provide in an Award Agreement for an Option that in the event all or a
portion of the Option is exercised by the Participant using previously
acquired Shares, the Participant shall automatically be granted (subject to
the available pool of Shares subject to grants of Awards as specified in
Section 4.2 of the Plan) a replacement Option (with an option price equal
to the Fair Market Value of a Share on the date of such exercise) for a
number of Shares equal to (or equal to a portion of) the number of shares
surrendered upon exercise of the Option. Such reload Option features may
be subject to such terms and conditions as the Committee shall determine,
including without limitation, a condition that the Participant retain the
Shares issued upon exercise of the Option for a specified period of time.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights shall be subject to
the terms and conditions set forth in Article 6 and this Article 8 and
Award Agreements governing Stock Appreciation Rights shall contain such
additional terms and conditions, not inconsistent with the express terms of
the Plan, as the Committee shall deem desirable.
8.2 Nature of Stock Appreciation Right. A Stock
Appreciation Right is an Award entitling a Participant to receive an amount
equal to the excess (or, if the Committee shall determine at the time of
grant, a portion of the excess) of the Fair Market Value of a Share of
Common Stock on the date of exercise of the SAR over the base price, as
described below, on the date of grant of the SAR, multiplied by the number
of Shares with respect to which the SAR shall have been exercised. The
base price shall be designated by the Committee in the Award Agreement for
the SAR and may be the Fair Market Value of a Share on the grant date of
the SAR or such other higher or lower price as the Committee shall
determine.
8.3 Exercise. A Stock Appreciation Right may be exercised
by a Participant in accordance with procedures established by the
Committee. The Committee may also provide that a SAR shall be
automatically exercised on one or more specified dates or upon the
satisfaction of one or more specified conditions. In the case of SARs
granted to Reporting Persons, exercise of the SAR shall be limited by the
Committee to the extent required to comply with the applicable requirements
of Rule 16b-3 under the Exchange Act.
8.4 Form of Payment. Payment upon exercise of a Stock
Appreciation Right may be made in cash, in installments, in Shares, by
issuance of a Deferred Compensation Option, or in any combination of the
foregoing, or in any other form as the Committee shall determine.
ARTICLE 9
RESTRICTED AWARDS
9.1 Types of Restricted Awards. Restricted Awards granted
under the Plan may be in the form of either Restricted Shares or Restricted
Units.
(a) Restricted Shares. A Restricted Share is an
Award of Shares transferred to a Participant subject to
such terms and conditions as the Committee deems
appropriate, including, without limitation,
restrictions on the sale, assignment, transfer, or
other disposition of such Restricted Shares and may
include a requirement that the Participant forfeit such
Restricted Shares back to Corporation upon termination
of Participant's employment (or service as a Non-
Employee Subsidiary Director or a Consultant) for
specified reasons within a specified period of time or
upon other conditions, as set forth in the Award
Agreement for such Restricted Shares. Each Participant
receiving a Restricted Share shall be issued a stock
certificate in respect of such Shares, registered in
the name of such Participant, and shall execute a stock
power in blank with respect to the Shares evidenced by
such certificate. The certificate evidencing such
Restricted Shares and the stock power shall be held in
custody by Corporation until the Restrictions thereon
shall have lapsed.
(b) Restricted Units. A Restricted Unit is an
Award of units (with each unit having a value
equivalent to one Share) granted to a Participant
subject to such terms and conditions as the Committee
deems appropriate, and may include a requirement that
the Participant forfeit such Restricted Units upon
termination of Participant's employment (or service as
a Non-Employee Subsidiary Director or a Consultant) for
specified reasons within a specified period of time or
upon other conditions, as set forth in the Award
Agreement for such Restricted Units.
9.2 General. Restricted Awards shall be subject to the
terms and conditions of Article 6 and this Article 9 and Award Agreements
governing Restricted Awards shall contain such additional terms and
conditions, not inconsistent with the express provisions of the Plan, as
the Committee shall deem desirable.
9.3 Restriction Period. Award Agreements for Restricted
Awards shall provide that Restricted Awards, and the Shares subject to
Restricted Awards, may not be transferred, and may provide that, in order
for a Participant to Vest in such Restricted Awards, the Participant must
remain in the employment (or remain as a Non-Employee Subsidiary Director
or a Consultant) of Corporation or its Subsidiaries, subject to relief for
reasons specified in the Award Agreement, for a period commencing on the
grant date of the Award and ending on such later date or dates as the
Committee may designate at the time of the Award (the "Restriction
Period"). During the Restriction Period, a Participant may not sell,
assign, transfer, pledge, encumber, or otherwise dispose of Shares received
under or governed by a Restricted Award grant. The Committee, in its sole
discretion, may provide for the lapse of restrictions in installments
during the Restriction Period. Upon expiration of the applicable
Restriction Period (or lapse of Restrictions during the Restriction Period
where the Restrictions lapse in installments) the Participant shall be
entitled to settlement of the Restricted Award or portion thereof, as the
case may be. Although Restricted Awards shall usually Vest based on
continued employment (or service as a Non-Employee Subsidiary Director or a
Consultant) and Performance Awards under Article 10 shall usually Vest
based on attainment of Performance Goals, the Committee, in its discretion,
may condition Vesting of Restricted Awards on attainment of Performance
Goals as well as continued employment (or service as a Non-Employee
Subsidiary Director or a Consultant). In such case, the Restriction Period
for such a Restricted Award shall include the period prior to satisfaction
of the Performance Goals.
9.4 Forfeiture. If a Participant ceases to be an employee
(or Consultant or Non-Employee Subsidiary Director) of Corporation or a
Subsidiary during the Restriction Period for any reason other than reasons
which may be specified in an Award Agreement (such as death, Disability, or
Retirement) the Award Agreement may require that all non-Vested Restricted
Awards previously granted to the Participant be forfeited and returned to
Corporation.
9.5 Settlement of Restricted Awards.
(a) Restricted Shares. Upon Vesting of a Restricted Share
Award, the legend on such Shares will be removed and the Participant's
stock power will be returned and the Shares will no longer be Restricted
Shares. The Committee may also, in its discretion, permit a Participant to
receive, in lieu of unrestricted Shares at the conclusion of the
Restriction Period, payment in cash, installments, or by issuance of a
Deferred Compensation Option equal to the Fair Market Value of the
Restricted Shares as of the date the Restrictions lapse.
(b) Restricted Units. Upon Vesting of a Restricted Unit
Award, a Participant shall be entitled to receive payment for Restricted
Units in an amount equal to the aggregate Fair Market Value of the Shares
covered by such Restricted Units at the expiration of the Applicable
Restriction Period. Payment in settlement of a Restricted Unit shall be
made as soon as practicable following the conclusion of the applicable
Restriction Period in cash, in installments, in Shares equal to the number
of Restricted Units, by issuance of a Deferred Compensation Option, or in
any other manner or combination of such methods as the Committee, in its
sole discretion, shall determine.
9.6 Rights as a Shareholder. A Participant shall have,
with respect to unforfeited Shares received under a grant of Restricted
Shares, all the rights of a shareholder of Corporation, including the right
to vote the shares, and the right to receive any cash dividends. Stock
dividends issued with respect to Restricted Shares shall be treated as
additional Shares covered by the grant of Restricted Shares and shall be
subject to the same Restrictions.
ARTICLE 10
PERFORMANCE AWARDS
10.1 General. Performance Awards shall be subject to the
terms and conditions set forth in Article 6 and this Article 10 and Award
Agreements governing Performance Awards shall contain such other terms and
conditions not inconsistent with the express provisions of the Plan, as the
Committee shall deem desirable.
10.2 Nature of Performance Awards. A Performance Award is
an Award of units (with each unit having a value equivalent to one Share)
granted to a Participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, the requirement
that the Participant forfeit such Performance Award or a portion thereof in
the event specified performance criteria are not met within a designated
period of time.
10.3 Performance Cycles. For each Performance Award, the
Committee shall designate a performance period (the "Performance Cycle")
with a duration to be determined by the Committee in its discretion within
which specified Performance Goals are to be attained. There may be several
Performance Cycles in existence at any one time and the duration of
Performance Cycles may differ from each other.
10.4 Performance Goals. The Committee shall establish
Performance Goals for each Performance Cycle on the basis of such criteria
and to accomplish such objectives as the Committee may from time to time
select. Performance Goals may be based on (i) performance criteria for
Corporation, a Subsidiary, or an operating group, (ii) a Participant's
individual performance, or (iii) a combination of both. Performance Goals
may include objective and subjective criteria. During any Performance
Cycle, the Committee may adjust the Performance Goals for such Performance
Cycle as it deems equitable in recognition of unusual or nonrecurring
events affecting Corporation, changes in applicable tax laws or accounting
principles, or such other factors as the Committee may determine.
10.5 Determination of Awards. As soon as practicable after
the end of a Performance Cycle, the Committee shall determine the extent to
which Performance Awards have been earned on the basis of performance in
relation to the established Performance Goals.
10.6 Timing and Form of Payment. Settlement of earned
Performance Awards shall be made to the Participant as soon as practicable
after the expiration of the Performance Cycle and the Committee's
determination under Section 10.5, in the form of cash, installments,
Shares, Deferred Compensation Options, or any combination of the foregoing
or in any other form as the Committee shall determine.
ARTICLE 11
OTHER STOCK-BASED AND COMBINATION AWARDS
11.1 Other Stock-Based Awards. The Committee may grant
other Awards under the Plan pursuant to which Shares are or may in the
future be acquired, or Awards denominated in or measured by Share
equivalent units, including Awards valued using measures other than the
market value of Shares. Other Stock-Based Awards are not restricted to any
specified form or structure and may include, without limitation, Share
purchase warrants, other rights to acquire Shares, and securities
convertible into or redeemable for Shares. Such Other Stock-Based Awards
may be granted either alone, in addition to, or in tandem with, any other
type of Award granted under the Plan.
11.2 Combination Awards. The Committee may also grant
Awards under the Plan in tandem or combination with other Awards or in
exchange of Awards, or in tandem or combination with, or as alternatives
to, grants or rights under any other employee plan of Corporation,
including the plan of any acquired entity. No action authorized by this
section shall reduce the amount of any existing benefits or change the
terms and conditions thereof without the Participant's consent.
ARTICLE 12
DEFERRAL ELECTIONS
The Committee may permit a Participant to elect to defer
receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant by virtue of the exercise, earn out,
or Vesting of an Award made under the Plan. If any such election is
permitted, the Committee shall establish rules and procedures for such
payment deferrals, including, but not limited to: (a) payment or crediting
of reasonable interest or other growth or earnings factor on such deferred
amounts credited in cash, (b) the payment or crediting of dividend
equivalents in respect of deferrals credited in Share equivalent units, or
(c) granting of Deferred Compensation Options.
ARTICLE 13
DIVIDEND EQUIVALENTS
Any Awards may, at the discretion of the Committee, earn
dividend equivalents. In respect of any such Award which is outstanding on
a dividend record date for Common Stock, the Participant may be credited
with an amount equal to the amount of cash or stock dividends that would
have been paid on the Shares covered by such Award, had such covered Shares
been issued and outstanding on such dividend record date. The Committee
shall establish such rules and procedures governing the crediting of
dividend equivalents, including the timing, form of payment, and payment
contingencies of such dividend equivalents, as it deems are appropriate or
necessary.
ARTICLE 14
NON-EMPLOYEE BOARD DIRECTORS
14.1 General. Awards shall be made to Non-Employee Board
Directors only pursuant to this Article 14. All Non-Employee Board
Directors shall receive Initial Director Options and Annual Director
Options. No person, including the members of the Board or the Committee,
shall have any discretion as to the selection of eligible recipients or the
determination of the type, amount, or terms of Awards pursuant to this
Article 14.
14.2 Eligibility. The persons eligible to receive Awards
pursuant to this Article 14 are all Non-Employee Board Directors of
Corporation.
14.3 Definitions. For purposes of this Article 14, the
following terms shall have the meanings set forth below:
"Annual Meeting Date" means the date of Corporation's
regular annual meeting of shareholders.
"Offering Date" means the closing date of Corporation's
initial public offering of Shares pursuant to a registration statement
which has become effective under the Securities Act of 1933.
14.4 Initial Director Options.
(a) Grant of Initial Director Options. As of the Offering
Date, each Non-Employee Board Director who is a member of the Board on the
Offering Date shall be granted automatically an Initial Director Option to
purchase 1,500 Shares.
(b) Option Price. The option purchase price for each
Initial Director Option shall be equal to the public offering price of a
Share.
(c) Terms of Initial Director Options. Each Initial
Director Option shall have the terms and conditions specified in the form
of Award Agreement attached to this Plan as Appendix A.
14.5 Annual Director Options.
(a) Grant of Annual Director Options. As of each Annual
Meeting Date, each Non-Employee Board Director whose term begins on or
continues after that Annual Meeting Date shall be granted automatically an
Annual Director Option to purchase 500 Shares.
(b) Option Price. The option exercise price for each
Annual Director Option shall be equal to the Fair Market Value of a Share
as of the Annual Meeting Date.
(c) Terms of Annual Director Options. Each Annual Director
Option shall have the terms and conditions specified in the form of Award
Agreement attached to this Plan as Appendix A.
ARTICLE 15
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
15.1 Plan Does Not Restrict Corporation. The existence of
the Plan and the Awards granted under the Plan shall not affect or restrict
in any way the right or power of the Board or the shareholders of
Corporation to make or authorize any adjustment, recapitalization,
reorganization, or other change in Corporation's capital structure or its
business, any merger or consolidation of the Corporation, any issue of
bonds, debentures, preferred or prior preference stocks ahead of or
affecting Corporation's capital stock or the rights thereof, the
dissolution or liquidation of Corporation or any sale or transfer of all or
any part of its assets or business, or any other corporate act or
proceeding.
15.2 Adjustments by the Committee. In the event of any
change in capitalization affecting the Common Stock of Corporation, such as
a stock dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Stock, such
proportionate adjustments, if any, as the Committee, in its sole
discretion, may deem appropriate to reflect such change, shall be made with
respect to the aggregate number of Shares for which Awards in respect
thereof may be granted under the Plan, the maximum number of Shares which
may be sold or awarded to any Participant, the number of Shares covered by
each outstanding Award, and the base price or purchase price per Share in
respect of outstanding Awards. The Committee may also make such
adjustments in the number of Shares covered by, and price or other value of
any outstanding Awards in the event of a spin-off or other distribution
(other than normal cash dividends), of Corporation assets to shareholders.
ARTICLE 16
AMENDMENT AND TERMINATION
Without further approval of Corporation's shareholders, the
Board may at any time terminate the Plan, or may amend it from time to time
in such respects as the Board may deem advisable, except that the Board may
not, without approval of the shareholders, make any amendment which would
(i) materially increase the benefits accruing to Participants under the
Plan, (ii) materially increase the aggregate number of shares of Common
Stock which may be issued under the Plan (except for adjustments pursuant
to Article 15 of the Plan), or (iii) materially modify the requirements as
to eligibility for participation in the Plan. Without further shareholder
approval, the Board may amend the Plan to take into account changes in
applicable securities, federal income tax laws, and other applicable laws.
Further, should the provisions of Rule 16b-3, or any successor rule, under
the Exchange Act be amended, the Board, without further shareholder
approval, may amend the Plan as necessary to comply with any modifications
to such rule. The provisions of Article 14 may not be amended more than
once every six months, other than to conform with changes in the Code or in
Rule 16b-3 under the Exchange Act.
ARTICLE 17
MISCELLANEOUS
17.1 Tax Withholding. Corporation shall have the right to
deduct from any settlement of any Award under the Plan, including the
delivery or vesting of Shares, any federal, state, or local taxes of any
kind required by law to be withheld with respect to such payments or to
take such other action as may be necessary in the opinion of Corporation to
satisfy all obligations for the payment of such taxes. The recipient of
any payment or distribution under the Plan shall make arrangements
satisfactory to Corporation for the satisfaction of any such withholding
tax obligations. Corporation shall not be required to make any such
payment or distribution under the Plan until such obligations are
satisfied.
17.2 Unfunded Plan. The Plan shall be unfunded and
Corporation shall not be required to segregate any assets that may at any
time be represented by Awards under the Plan. Any liability of Corporation
to any person with respect to any Award under the Plan shall be based
solely upon any contractual obligations that may be effected pursuant to
the Plan. No such obligation of Corporation shall be deemed to be secured
by any pledge of, or other encumbrance on, any property of Corporation.
17.3 Payments to Trust. The Committee is authorized to
cause to be established a trust agreement or several trust agreements
whereunder the Committee may make payments of amounts due or to become due
to Participants in the Plan.
17.4 Annulment of Awards. Any Award Agreement may provide
that the grant of an Award payable in cash is revocable until cash is paid
in settlement thereof or that grant of an Award payable in Shares is
revocable until the Participant becomes entitled to the certificate in
settlement thereof. In the event the employment (or service as a
Non-Employee Subsidiary Director or a Consultant) of a Participant is
terminated for cause (as defined below), any Award which is revocable shall
be annulled as of the date of such termination for cause. For the purpose
of this Section 17.4, the term "for cause" shall have the meaning set forth
in the Participant's employment agreement, if any, or otherwise means any
discharge (or removal) for material or flagrant violation of the policies
and procedures of Corporation or for other job performance or conduct which
is materially detrimental to the best interests of Corporation, as
determined by the Committee.
17.5 Engaging in Competition With the Corporation. Any
Award Agreement may provide that, if a Participant terminates employment
(or service as a Non-Employee Subsidiary Director or a Consultant) with
Corporation or a Subsidiary for any reason whatsoever, and within a period
of time (as specified in the Award Agreement) after the date thereof
accepts employment with any competitor of (or otherwise engages in
competition with) Corporation, the Committee, in its sole discretion, may
require such Participant to return to Corporation the economic value of any
Award that is realized or obtained (measured at the date of exercise,
Vesting, or payment) by such Participant at any time during the period
beginning on the date that is six months prior to the date of such
Participant's termination of employment (or service as a Non-Employee
Subsidiary Director or a Consultant) with Corporation.
17.6 Other Corporation Benefit and Compensation Programs.
Payments and other benefits received by a Participant under an Award made
pursuant to the Plan shall not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination indemnity or
severance pay law of any state or country and shall not be included in, nor
have any effect on, the determination of benefits under any other employee
benefit plan or similar arrangement provided by Corporation or a Subsidiary
unless expressly so provided by such other plan or arrangements, or except
where the Committee expressly determines that an Award or portion of an
Award should be included to accurately reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion
of cash compensation. Awards under the Plan may be made in combination
with or in tandem with, or as alternatives to, grants, awards, or payments
under any other Corporation or Subsidiary plans, arrangements, or programs.
The Plan notwithstanding, Corporation or any Subsidiary may adopt such
other compensation programs and additional compensation arrangements as it
deems necessary to attract, retain, and reward employees and directors for
their service with Corporation and its Subsidiaries.
17.7 Securities Law Restrictions. No Shares shall be
issued under the Plan unless counsel for Corporation shall be satisfied
that such issuance will be in compliance with applicable federal and state
securities laws. Certificates for Shares delivered under the Plan may be
subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed, and any applicable federal or
state securities law. The Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.
17.8 Governing Law. Except with respect to references to
the Code or federal securities laws, the Plan and all actions taken
thereunder shall be governed by and construed in accordance with the laws
of the state of Maryland.
ARTICLE 18
SHAREHOLDER APPROVAL
The adoption of the Plan and the grant of Awards under the
Plan are expressly subject to the approval of the Plan by Corporation's
shareholders holding a majority of Corporation's outstanding Shares.
<PAGE>
Appendix A
Form of
AWARD AGREEMENT
Under The
Barrett Business Services, Inc.
1993 Stock Incentive Plan
[INITIAL] [ANNUAL] DIRECTOR OPTIONS
Corporation: BARRETT BUSINESS SERVICES, INC.
2828 S.W. Kelly Street
Portland, Oregon 97201
Participant: _______________________________
_______________________________
_______________________________
Date: _______________________________
Corporation maintains the Barrett Business Services, Inc.,
1993 Stock Incentive Plan (the "Plan").
This Award Agreement evidences the grant of an [Initial]
[Annual] Director Option (the "Option") to Participant.
The parties agree as follows:
1. Defined Terms
When used in this Agreement, the following terms shall have
the meaning specified below:
(a) "Acquiring Person" shall mean any person or
related person or related persons which constitute a
"group" for purposes of Section 13(d) and Rule 13d-5
under the Securities Exchange Act of 1934 (the
"Exchange Act"), as such Section and Rule are in effect
as of the Grant Date; provided, however, that the term
Acquiring Person shall not include (i) Corporation or
any of its Subsidiaries, (ii) any employee benefit plan
of Corporation or any of its Subsidiaries, (iii) any
entity holding voting capital stock of Corporation for
or pursuant to the terms of any such employee benefit
plan, or (iv) any person or group solely because such
person or group has voting power with respect to
capital stock of Corporation arising from a recoverable
proxy or consent given in response to a public proxy or
consent solicitation made pursuant to the Exchange Act.
(b) "Change in Control" shall mean:
(i) A change in control of Corporation
of a nature that would be required to be
reported in response to Item 6(e) of
Schedule 14A of Regulation 14A as in effect
on the Grant Date pursuant to the Exchange
Act; provided that, without limitation, such
a change in control shall be deemed to have
occurred at such time as any Acquiring Person
hereafter becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 30 percent
or more of the combined voting power of
Corporation Voting Securities; or
(ii) During any period of
12 consecutive calendar months, individuals
who at the beginning of such period
constitute the Board cease for any reason to
constitute at least a majority thereof unless
the election, or the nomination for election,
by Corporation shareholders of each new
director was approved by a vote of at least a
majority of the directors then still in
office who were directors at the beginning of
the period; or
(iii) There shall be consummated
(i) any consolidation or merger of
Corporation in which Corporation is not the
continuing or surviving corporation or
pursuant to which Voting Securities would be
converted into cash, securities, or other
property, other than a merger of Corporation
in which the holders of Voting Securities
immediately prior to the merger have the same
proportionate ownership of common stock of
the surviving corporation immediately after
the merger, or (ii) any sale, lease,
exchange, or other transfer (in one
transaction or a series of related
transactions) of all, or substantially all,
of the assets of Corporation, provided that
any such consolidation, merger, sale, lease,
exchange, or other transfer consummated at
the insistence of an appropriate banking
regulatory agency shall not constitute a
Change in Control; or
(iv) Approval by the shareholders of
Corporation of any plan or proposal for the
liquidation or dissolution of Corporation.
(c) "Change in Control Date" shall mean the first
date following the Grant Date on which a Change in
Control has occurred.
(d) "Disability" shall mean permanent and total
disability as defined in Section 22(e)(3) of the Code.
(e) "Grant Date" shall mean the date the Option
is granted, which is reflected as the date of this
Agreement.
(f) "Retirement" shall mean ceasing to be a
member of the Board for any reason (other than by
removal) after service on the Board for at least 10
years.
(g) "Voting Securities" shall mean Corporation's
issued and outstanding securities ordinarily having the
right to vote at elections for the Board.
(h) Capitalized terms not otherwise defined in
this Agreement have the meanings given them in the
Plan.
2. Grant of Option
Subject to the terms and conditions of this Agreement
and the Plan, Corporation grants to Participant the Option to
purchase ________ Shares of Corporation's common stock at $
per share.
3. Terms of Option
The Option shall be subject to all the provisions of
the Plan and to the following terms and conditions:
par Term. The term of the Option shall be unlimited
unless terminated earlier in accordance with this Agreement.
3.2 Time of Exercise. Unless the Option is otherwise
terminated or the time of its exercisability is accelerated in
accordance with this Agreement, the Option may be exercised from
time to time to purchase Shares up to the following limits (based
on years after the Grant Date):
(a) During the first year - none;
(b) During the second year - up to 25 percent of
the total Shares;
(c) During the third year - up to 50 percent of
the total Shares;
(d) During the fourth year - up to 75 percent of
the total Shares; and
(e) After the fourth year - 100 percent.
3.3 Continuation as Director. If Participant ceases
to be a member of the Board for any reason, the right to exercise
the Option shall expire at the end of the following periods:
<TABLE>
<CAPTION>
After Termination
On Account Of Period
<S> <C>
death 1 year
Retirement 5 years
Disability 1 year
any other reason 3 months
</TABLE>
3.4 Acceleration of Exercisability. Notwithstanding
the schedule provided in subsection 3.2, the Option shall become
fully exercisable upon the occurrence of either:
(a) Participant's death or withdrawal from the
Board by reason of Disability or Retirement; or
(b) A Change in Control Date.
3.5 Method of Exercise. The Option may be exercised
by delivery of written notice to Corporation stating the number
of Shares, form of payment, and proposed date of closing.
3.6 Other Documents. Participant shall furnish
Corporation before closing such other documents or
representations as Corporation may require to assure compliance
with applicable laws and regulations.
3.7 Payment. The purchase price for the Shares
purchased upon exercise of the Option shall be paid in full at or
before closing by one or a combination of the following:
(a) Payment in cash; or
(b) Delivery of previously acquired Shares having
a Fair Market Value equal to the purchase price.
3.8 Previously Acquired Shares. Delivery of
previously acquired Shares in full or partial payment for the
exercise of the Option shall be subject to the following
conditions:
(a) The Shares tendered shall be in good delivery
form;
(b) The Fair Market Value of the Shares tendered,
together with the amount of cash, if any, tendered
shall equal or exceed the exercise price of the Option;
(c) Any Shares remaining after satisfying the
payment for the Option shall be reissued in the same
manner as the Shares tendered; and
(d) No fractional Shares will be issued and cash
will not be paid to the Optionee for any fractional
Share value not used to satisfy the Option purchase
price.
3.9 Reload Option. In the event all or a portion of
the Option is exercised by Participant by delivering previously
acquired Shares, Participant shall be granted automatically a
replacement Option for a number of Shares equal to the number of
Shares delivered to Corporation by Participant upon exercise of
the Option. The grant date for such replacement Option shall be
the date of exercise and the option price for such replacement
Option shall be the Fair Market Value of a Share on such grant
date. The replacement Option initially shall not be exercisable
and shall become fully exercisable six months after the grant
date. In all other respects, the replacement Option shall be
subject to all the terms and conditions of this Award Agreement.
4. Tax Reimbursement
In the event any withholding or similar tax liability
is imposed on Corporation in connection with or with respect to
any exercise of the Option, the Participant agrees to pay to
Corporation an amount sufficient to provide for such tax
liability.
5. Conditions Precedent
Corporation will use its best efforts to obtain
approval of the Plan and this Option by any state or federal
agency or authority that Corporation determines has jurisdiction.
If Corporation determines that any required approval cannot be
obtained, this Option shall terminate on notice to the Optionee
to that effect. Without limiting the foregoing, Corporation
shall not be required to issue any Shares upon exercise of the
Option, or any portion thereof, until Corporation shall have
taken any action required to comply with all applicable federal
and state securities laws.
6. Successorship
Subject to restrictions on transferability set forth in
the Plan, this Agreement shall be binding upon and benefit the
parties, their successors and assigns.
7. Notices
Any notices under this Option shall be in writing and
shall be effective when actually delivered personally or, if
mailed, when deposited as registered or certified mail directed
to the address of Corporation's records or to such other address
as a party may certify by notice to the other party.
8. Arbitration
Any dispute or claim that arises out of or that relates
to this Agreement or to the interpretation, breach, or
enforcement of this Agreement, shall be resolved by mandatory
arbitration in accordance with the then effective arbitration
rules of Arbitration Service of Portland, Inc., or American
Arbitration Association, whichever organization is selected by
the party which first initiates arbitration by filing a claim in
accordance with the filing rules of the organization selected,
and any judgment upon the award rendered pursuant to such
arbitration may be entered in any court having jurisdiction
thereof.
9. Attorneys' Fees
In the event of any suit or action or arbitration
proceeding to enforce or interpret any provision of this
Agreement (or which is based on this Agreement), the prevailing
party shall be entitled to recover, in addition to other costs,
reasonable attorneys' fees in connection with such suit, action,
arbitration, and in any appeal. The determination of who is the
prevailing party and the amount of reasonable attorneys' fees to
be paid to the prevailing party shall be decided by the
arbitrator or arbitrators (with respect to attorneys' fees
incurred prior to and during the arbitration proceedings) and by
the court or courts, including any appellate courts, in which the
matter is tried, heard, or decided, including the court which
hears any exceptions made to an arbitration award submitted to it
for confirmation as a judgment (with respect to attorneys' fees
incurred in such confirmation proceedings).
BARRETT BUSINESS SERVICES, INC.
By
Its
Participant<PAGE>
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-71792) of Barrett
Business Services, Inc. of our report dated February 7, 1994
appearing on page 20 of this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 38 of this
Annual Report on Form 10-K.
Price Waterhouse
Portland, Oregon
March 2,, 1994<PAGE>
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-71792) of Barrett
Business Services, Inc. of our report dated February 14, 1994
appearing on page 43 of this Annual Report on Form 10-K.
FRANK, RIMERMAN & CO
San Jose California
March 22, 1994<PAGE>
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below designates and
appoints WILLIAM W. SHERERTZ, JACK D. WILLIAMSON, JR., and PETER
J. SCHENK, and each of them, his true and lawful attorneys-in-
fact and agents to sign the annual report on Form 10-K of Barrett
Business Services, Inc., a Maryland corporation, for the year
ended December 31, 1993, and to file said report, with all
exhibits thereto, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended. Each
person whose signature appears below also grants full power and
authority to these attorneys-in-fact and agents to take any
action and execute any instruments that they deem necessary or
desirable in connection with said report, as fully as he could do
in person, hereby ratifying and confirming all that the
attorneys-in-fact and agents or their substitutes may lawfully do
or cause to be done.
IN WITNESS WHEREOF, this power of attorney has been executed
by each of the undersigned as of the 8th day of March, 1994.
Signature Title
/s/ WILLIAM W. SHERERTZ President and Director
William W. Sherertz
/s/ JACK D. WILLIAMSON, JR. Vice President-Finance,
Jack D. Williamson, Jr. Treasurer, and Director
/s/ ROBERT R. AMES Director
Robert R. Ames
/s/ JEFFREY L. BEAUDOIN Director
Jeffrey L. Beaudoin
/s/ ANTHONY MEEKER Director
Anthony Meeker
/s/ STANLEY G. RENECKER Director
Stanley G. Renecker
EXHIBIT 24<PAGE>
