U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JANUARY 31, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___ TO ___.
Commission file number 0-23144
PERSONNEL MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1671569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
(Address of principal executive offices) (Zip Code)
(317) 888-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1994 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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
Class Outstanding at March 13, 1998
Common Stock, without par value 2,048,771 shares
<PAGE>
PERSONNEL MANAGEMENT, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
(Unaudited)
Condensed Consolidated Balance Sheets
at January 31, 1998 and October 31, 1997 3
Condensed Consolidated Statements of
Income for the three months ended
January 31, 1998 and 1997 4
Condensed Consolidated Statements of
Cash Flows for the three months ended
January 31, 1998 and 1997 5
Notes to Condensed Consolidated
Financial Statements 6-8
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-12
Item 3 - Quantitative and Qualitative
Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 13
Item 4 - Submission of Matters to a Vote of
Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURE 14
EXHIBIT INDEX 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
January 31, October 31,
1998 1997
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 164,985 $ 182,980
Accounts receivable, net 7,717,413 10,004,512
Current portion of notes receivable 62,211 72,211
Income taxes receivable 17,296 17,296
Prepaid expenses 214,115 180,126
Deferred tax asset 515,500 515,500
Other current assets 105,196 78,633
Total current assets 8,796,716 11,051,258
Property and equipment, net 1,290,313 1,300,637
Notes receivable, shareholder 564,162 552,600
Goodwill, net 7,273,396 7,219,984
Other 169,125 146,337
Total assets $18,093,712 $20,270,816
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 72,498 $ 1,100,511
Bank line of credit 189,000 -
Accounts payable 385,613 331,661
Accrued compensation and benefits 2,139,984 2,536,924
Accrued workers' compensation claims 1,050,892 1,024,035
Income taxes payable 20,028 125,228
Other current liabilities 189,933 236,803
Current portion of notes payable 500,000 532,732
Total current liabilities 4,547,948 5,887,894
Notes payable 2,060,986 3,349,987
Deferred tax liability 173,200 173,200
SHAREHOLDERS' EQUITY
Common stock 8,151,671 7,924,994
Retained earnings 3,159,907 2,934,741
Total shareholders' equity 11,311,578 10,859,735
Total liabilities and shareholders' equity $18,093,712 $20,270,816
See accompanying notes.
</TABLE>
<PAGE>
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
Three months ended
January 31,
1998 1997
<S> <C> <C>
Revenues $20,240,898 $16,626,425
Cost of services 16,335,430 13,387,427
Gross margin 3,905,468 3,238,998
Operating expenses:
General and administrative 3,157,245 2,695,114
Selling 175,131 82,186
Amortization of goodwill 106,403 91,473
3,438,779 2,868,773
Income from operations 466,689 370,225
Interest expense, net (67,723) (46,583)
Income before income taxes 398,966 323,642
Income taxes 173,800 155,300
Net income $ 225,166 $ 168,342
Basic net income per share $ 0.11 $ 0.08
Diluted net income per share $ 0.11 $ 0.08
Weighted average shares outstanding:
Basic 2,030,654 2,020,156
Diluted 2,104,352 2,033,024
See accompanying notes.
</TABLE>
<PAGE>
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
Three months ended
January 31,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 225,166 $ 168,342
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of goodwill 106,403 91,473
Depreciation 125,753 95,013
Deferred income taxes - (26,000)
Interest on shareholder loan (11,562) (10,837)
Changes in operating assets and
liabilities:
Accounts and notes receivable 2,297,099 1,111,826
Prepaid expenses and other assets (83,340) (82,460)
Accounts payable 53,952 (96,902)
Accrued liabilities and other payables (522,153) (1,022,115)
Net cash provided by operations 2,191,318 228,340
INVESTING ACTIVITIES:
Payments under earnout provisions of
acquisition agreements (159,815) (13,025)
Purchases of property and equipment (115,429) (121,290)
Net cash used by investing activities (275,244) (134,315)
FINANCING ACTIVITIES:
Proceeds from exercises of stock options 175,280 -
Repayment of officer loan 51,397 -
Net change in bank overdrafts (1,028,013) 482,030
Payments on notes payable (157,733) (30,434)
Net payments on line of credit (975,000) (350,000)
Net cash provided (used) by
financing activities (1,934,069) 101,596
Increase (decrease) in cash (17,995) 195,621
Cash at beginning of period 182,980 180,462
Cash at end of period $ 164,985 $ 376,083
See accompanying notes.
</TABLE>
<PAGE>
PERSONNEL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
(unaudited)
1. Basis of Presentation
The Company, pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC), has prepared the accompanying financial statements.
This Report on Form 10-Q should be read in conjunction with the Company's
financial statements and notes thereto for the year ended October 31, 1997
included in the Company's 1997 Annual Report to Shareholders. Certain
information and footnote disclosures which are normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules and regulations. The
information reflects all normal and recurring adjustments which, in the opinion
of management, are necessary for a fair presentation of the financial position
of the Company and its results of operations for the interim periods set forth
herein. Especially because of the seasonality of the Company's business, the
results for the three months ended January 31, 1998 are not necessarily
indicative of the results to be expected for the full year. The financial
statements include the combined financial position, operations and cash flows
for Personnel Management, Inc. and its wholly-owned subsidiaries, hereafter
referred to as "the Company".
2. Net Income Per Share
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share" during the period. SFAS No. 128 replaced the
previously reported primary and fully diluted net income per share with basic
and diluted net income per share. Unlike primary net income per share, basic net
income per share excludes any dilutive effects of options and warrants. In
accordance with SFAS No. 128, net income per share for prior year periods has
been presented, and where necessary, restated. Previously reported net income
per share amounts were not materially affected by the adoption of SFAS No. 128.
<PAGE>
The following table sets forth the computation of basic and diluted net income
per share:
<TABLE>
Three months ended
January 31,
1998 1997
<S> <C> <C>
Numerator for both basic and diluted
net income per share:
Net income $ 225,166 $ 168,342
Denominator:
Denominator for basic net income per
share - weighted-average shares 2,030,654 2,020,156
Effect of dilutive securities:
Employee stock options 63,698 2,868
Warrants 10,000 10,000
Dilutive potential common shares 73,698 12,868
Denominator for diluted net income per
share - adjusted weighted-average shares 2,104,352 2,033,024
Basic net income per share $ 0.11 $ 0.08
Diluted net income per share $ 0.11 $ 0.08
</TABLE>
Options to purchase 25,234 shares of common stock at prices ranging from $12.21
to $16.73 per share were outstanding during the three months ended January 31,
1998 but were not included in the computation of diluted net income per share
because the options' exercise price was greater than the average market price of
the common shares and, therefore, the effect would be antidilutive.
3. Commitments and Contingencies
In the ordinary course of business, the Company may, from time to time, be
charged for allegations of discrimination or other employment related claims by
temporary employees. There are no cases of this nature pending or threatened,
individually or in the aggregate, that management believes will result in a
material loss.
<PAGE>
In January 1997, the Company was named in a lawsuit by an insurance carrier
against certain Florida staffing companies acquired by the Company in 1994. The
plaintiff alleges breach of contract and tort causes of action for underpayment
of workers' compensation insurance premiums in the amount of $1,402,000 plus
unspecified damages. The Company denies the validity of the plaintiff's claims.
The agreement by which the Company acquired the staffing companies specifically
disclaims any obligation with regard to undisclosed liabilities of the acquired
staffing companies. Management regards as unlikely that the outcome of this
action will have a material adverse effect upon the Company's financial
condition or results of operations. Accordingly, no provision has been recorded
in the accompanying financial statements.
On December 12, 1997, the Company, its Chief Executive Officer and the Company's
former Chief Financial Officer were named defendants in a complaint filed by two
investors who are seeking damages for trading losses they claim they incurred in
1995 as a consequence of alleged misstatements. The plaintiffs seek damages of
approximately $600,000 plus interest, attorney's fees, punitive damages, and
treble damages. The Company intends to vigorously defend the lawsuit. Management
believes that any potential loss resulting from this action would be
substantially covered by insurance. Management regards as unlikely that the
outcome of this lawsuit will have a material adverse effect upon the Company's
financial condition or results of operations. Accordingly, no provision has been
recorded in the accompanying financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
Company's 1997 Annual Report to Shareholders.
SELECTED INCOME STATEMENT COMPARISONS
REVENUES. For the three months ended January 31, 1998, revenues increased
$3,614,000 or 21.7% from $16,626,000 in fiscal 1997 to $20,241,000. Internal
revenue growth, which excludes acquired offices, was $2,725,000 or 16.4% over
the prior year period. Revenue increases from offices open more than one year
amounted to $2,324,000 or 14.0% over the prior year period. The remainder of the
increase in revenues of $1,290,000 or 7.7% came from acquired branches and
offices opened within the last year.
GROSS MARGIN. Gross margin is defined by the Company as revenues less the cost
of providing services, which includes hourly wages of temporary employees,
employer payroll taxes, benefits for temporary employees and workers'
compensation costs. Gross margin for the three months ended January 31, 1998,
was $3,905,000 or 19.3% of revenues. This compares to $3,239,000 or 19.5% of
revenues for the corresponding period in fiscal 1997. The increase in gross
margin of $666,000 or 20.6% was primarily due to increased revenues. The decline
in gross margin as a percent of revenues was primarily attributable to the costs
associated with the benefit program for temporary employees that became
effective in January 1997. These expenses were partially offset by slightly
lower workers' compensation costs measured as a percent of revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") for the three months ended January 31, 1998
were $3,332,000 or 16.5% of revenues compared to $ 2,777,000 or 16.7% of
revenues in the corresponding prior year period. The increase in SG&A expenses
of $555,000 or 20.0% was primarily associated with expenses related to acquired
branches and offices opened within the last year which amounted to $240,000 or
43.2% of the increase in SG&A expense. Increases in SG&A expenses from offices
open more than one year amounted to $315,000 or 11.3% over the prior year
period. This increase in expense was associated with increased revenues, higher
selling expenses related to an increase in marketing efforts and sales staff,
data processing expenses related to converting all offices to common systems in
fiscal 1997, and increased professional fees. These increases in SG&A expenses
were offset by lower bad debt expense.
AMORTIZATION OF GOODWILL. Goodwill represents the unamortized cost in excess of
fair value of net assets acquired and is being amortized on a straight-line
basis over 20 years. Goodwill amortization for the three months ended January
31, 1998 increased $15,000 or 16.3% compared to the corresponding prior year
period. This increase was a result of acquisitions in the prior fiscal year and
the amortization of payments of additional purchase price under earnout
provisions of prior acquisition agreements.
<PAGE>
INTEREST EXPENSE, NET. The increase of $21,000 or 45.4% in interest expense, net
of interest income, for the three months ended January 31, 1998 compared to the
prior year period was due primarily to higher average borrowings in the current
year period.
INCOME TAXES. Income tax expense for the three months ended January 31, 1998
increased $18,000 or 11.9% compared to the prior year period. This increase was
a result of an increase in net income before income taxes of $75,000 or 23.3%
which was partially offset by a decrease in the effective income tax rate. The
effective income tax rate for the three months ended January 31, 1998 was 43.6%
compared to 48.0% in the prior year period.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities during the three months ended January 31,
1998 was $2,191,000. Primary sources of operating cash flow were from net income
and related non-cash adjustments and the seasonal reduction in accounts
receivable. These sources of cash were partially offset by a reduction in
accrued liabilities and other payables. Other uses of cash were $1,133,000 for
net repayments on borrowings, $160,000 for payments under earnout provisions of
acquisition agreements and $115,000 for capital expenditures. Additional sources
of cash included $175,000 from the exercise of options to issue 19,853 common
shares and $51,000 from the repayment of a loan to a former officer of the
Company.
Total capitalization at January 31, 1998 was $14,062,000, comprised of
$2,750,000 of debt and $11,312,000 of equity. Debt as a percentage of total
capitalization decreased from 26.3% at October 31, 1997 to 19.6% at January 31,
1998.
The Company's bank credit facility provides the ability to borrow up to
$11,000,000 for general working capital purposes, acquisition financing and
letters of credit. The facility consists of a two year $8,500,000 revolving line
of credit and a five year $2,500,000 term loan. Borrowings under the line of
credit are subject to certain borrowing base requirements. Interest is charged
on the outstanding balance of the line of credit at rates reflecting the bank's
prime rate or the London Interbank Offered Rate (LIBOR) plus a margin of up to
2.75% depending upon certain financial ratios. The Company also pays fees of
1/8% on the unused portion of the line during the term of this agreement. The
line of credit terminates on January 31, 1999. Upon termination, borrowings for
acquisition financing under this line, up to $4,000,000, convert to a five year
term loan with terms and conditions substantially similar to the existing term
loan. At January 31, 1998, up to $561,000 of the $750,000 outstanding under the
line of credit could be converted to a new five year term loan. The Company's
availability under its line of credit facility as of January 31, 1998, was
approximately $4,953,000 at an interest rate of LIBOR plus 1.25%.
<PAGE>
The existing term loan is payable in equal monthly principal installments of
$42,000 beginning February 1997. The term loan matures on January 31, 2002, and
bears interest at rates reflecting the bank's prime rate or LIBOR plus a margin
of up to 3.0% depending upon certain financial ratios. At January 31, 1998, the
interest rate was LIBOR plus 1.50%.
Currently, the Company is not in negotiations to renew its bank line of credit
that terminates in January 1999. The Company believes its has a favorable
relationship with its bank and at the appropriate time, Management believes a
new line of credit is expected to be arranged with terms and conditions similar
to the existing line of credit.
Management believes that cash provided by operations, augmented by borrowings
for working capital and acquisition purposes under the bank credit facility,
will be adequate to satisfy the Company's acquisition, capital expenditure and
operating cash requirements during fiscal 1998. At January 31, 1998, the Company
was in compliance with its debt covenants.
On February 2, 1998, the Company acquired Summit Temporaries, Inc. ("Summit"), a
staffing firm based in Atlanta, Georgia, for $2,742,000. Summit provides
clerical and light industrial staffing services through four offices and has
annual revenues of approximately $6 million. The purchase price was determined
as a result of arms-length negotiations between unrelated parties. A copy of the
purchase agreement with respect to the transaction are annexed as Exhibits ___
and ___. The purchase price was paid with $1,700,000 of cash, borrowed under the
Company's line of credit with KeyBank N.A. and $1,042,000 of sellers' notes
payable. Notes payable consist of a $950,000 note payable in 16 equal quarterly
installments of $59,000, plus accrued interest at 8.50%, through February 2002;
and a $100,000 non-interest bearing note discounted at 8.0%, payable in eight
equal quarterly installments of $12,500 through February 2000. The Company will
record goodwill and other intangible assets of approximately $2.9 million
including estimated acquisition related costs of $160,000.
The acquisition of Summit Temporaries, Inc. caused the Company to violate the
minimum level of tangible net worth covenant under its bank credit facility. The
bank has waived the violation of this debt covenant. Future acquisitions that
cause the Company's tangible net worth to decrease further require bank
approval. No other restrictions have been placed on the Company's ability to
borrow under the terms of the credit agreement.
<PAGE>
YEAR 2000 COMPLIANCE
The Year 2000 issue arises with computer software that has been designed without
considering the impact of the upcoming change in the century and, therefore,
cannot distinguish between years such as 1900 and 2000. The vendor of the
software used by the Company and its subsidiaries to manage staffing functions
has informed the Company that it is evaluating the software to determine what
modifications will be needed to address Year 2000 issues. The vendor has assured
the Company that such evaluation and any modifications will be completed by
early 1999. The Company does not anticipate that the cost of resolving any Year
2000 issues will be material to its financial condition or results of
operations. If, however, Year 2000 issues are not resolved in a timely manner or
require substantial expenditures, the Company's business, financial condition
and/or results of operations could be adversely affected.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
This item is currently not applicable to the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported in Item 1 of the Company's report on Form 10-K for the
year ended October 31, 1997, the Company, its Chief Executive Officer and the
Company's former Chief Financial Officer have been named defendants in a
complaint filed under the caption James H. Wright and V. Gene Wright v.
Personnel Management, Inc., James E. Burnette, and Don R. Taylor, on December
12, 1997, in Marion County Circuit Court, Indianapolis, Indiana (Cause No.
49CO19712 CP2844). The complaint was filed by two investors who are seeking
damages for trading losses they claim they incurred in 1995 as a consequence of
alleged misstatements. The plaintiffs seek damages of approximately $600,000
plus interest, attorney's fees, punitive damages, and treble damages. The
Company intends to vigorously defend the lawsuit. Although, due to the early
stage of this lawsuit, the Company has not undertaken any comprehensive
evaluation of the claims, and although there can be no such assurance, the
Company does not expect that resolution of this lawsuit will have a material
adverse impact upon the Company's consolidated financial condition or results of
operations. Management believes that any potential loss resulting from this
lawsuit would be substantially covered by insurance. The preceding sentences are
forward-looking statements; as with any litigation, a variety of factors could
cause the financial impact of the resolution of this lawsuit to differ
materially from the immaterial impact that is presently expected, including the
possibility that relevant facts or law may exist that are presently unknown to
Company management.
<PAGE>
Item 2. Changes in Securities
(c) During the three months ended January 31, 1998, the Company issued an
aggregate of 8,103 shares of common stock to directors of the Company upon
exercises by such directors of stock options issued under the 1994 Director
Stock Option Plan for an aggregate purchase price of $76,620. These shares were
not registered in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1998 Annual Meeting of Shareholders on March 5, 1998. At
the Annual Meeting, the Shareholders elected as Directors the two nominees,
David L. Swider and Richard L. VonDerHaar, proposed by the Board of Directors;
approved the 1998 Stock Option Plan; and amendments to the 1994 Director Stock
Option Plan. Messrs. Swider and VonDerHaar were elected for a three year term to
the Board of Directors. In addition to Messrs. Swider and VonDerHaar, Directors
whose term of office continued after the Annual Meeting consisted of Don R.
Taylor, Max K. DeJonge, and Joseph C. Cook, Jr.
The results of the proxy solicitation were as follows:
<TABLE>
<S> <C> <C> <C>
Votes Votes
Withheld Abstained
Votes and and
Cast For Against Non-Votes
Nominees to the
Board of Directors:
David L. Swider 1,253,596 0 0
Richard L. VonDerHaar 1,253,380 0 216
Approval of the 1998
Stock Option Plan 1,233,321 20,275 0
Approval of 1994 Director
Stock Option Plan amendments 1,251,791 1,805 0
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index on page 15 (which Exhibit Index is
incorporated herein by reference) are filed as part of this report.
(b) Reports on Form 8-K
An amendment to the Form 8-K dated October 24, 1997, in which the Company
reported it dismissed Price Waterhouse LLP as its independent auditor, was filed
on November 6, 1997.
On November 20, 1997, the Company filed Form 8-K in which the Company reported
it had engaged Ernst & Young LLP as its independent auditor.
SIGNATURE
Pursuant to the requirements 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.
PERSONNEL MANAGEMENT, INC.
Dated: March 16, 1998 By: /s/ Robert R. Millard
--------------------------
Robert R. Millard, Vice
President of Finance and
Administration (Principal
Financial Officer and
Authorized Signatory)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2 Asset Purchase Agreement, dated February 2, 1998,
by and amoung PMI LP II, Summit Temporaries, Inc.,
Leslie A. Barnett, Gary F. Nichols, and
Lyle D. Nichols
10.1 Schedule of Option Grants and Exercises
Under 1994 Director Stock Option Plan
10.2 Agreement and Right of First Refusal Regarding
Purchase of Stock, dated December 18, 1997, by
and between Personnel Management, Inc. and
Don R. Taylor
10.3 Amended Change of Control Severance Benefits
Agreement, dated December 18, 1997, by and
between Personnel Management, Inc. and
Don R. Taylor
10.4 Amended Change of Control Severance Benefits
Agreement, dated December 18, 1997, by and
between Personnel Management, Inc. and
Gary F. Hentschel
10.5 Amended Change of Control Severance Benefits
Agreement, dated December 18, 1997, by and
between Personnel Management, Inc. and
Robert R. Millard
10.6 Personnel Management, Inc. 1998 Stock Option Plan
27 Financial Data Schedule
EXHIBIT 2
----------------------------------------------------
ASSET PURCHASE AGREEMENT
Dated February 2, 1998,
by and among
PMI LP II,
SUMMIT TEMPORARIES, INC.,
LESLIE A. BARNETT,
GARY F. NICHOLS,
and
LYLE D. NICHOLS
----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Purchase and Sale 1
Section 1.1 Purchased Assets 1
Section 1.2 Excluded Assets 2
ARTICLE II Purchase Price 3
ARTICLE III Assumption of Liabilities 3
Section 3.1 Assumed Liabilities 3
Section 3.2 Excluded Liabilities 4
ARTICLE IV Closing and Effective Time 4
Section 4.1 Closing; Closing Date; Effective Time 4
Section 4.2 Closing Requirements 4
ARTICLE V Other Actions, Agreements and Covenants
of the Parties 5
Section 5.1 Assignment of Contracts 5
Section 5.2 Delivery of Property Received After
Effective Time 6
Section 5.3 Purchaser Appointed Attorney for Seller 6
Section 5.4 Execution of Further Documents;
Financial Statements 6
Section 5.5 Employment by Purchaser of Seller's Employees 7
Section 5.6 Noncompetition and Confidentiality Agreements 7
Section 5.7 IRS Form 8594 7
ARTICLE VI Representations and Warranties by Seller,
Barnett, G. Nichols and L. Nichols 7
Section 6.1 Corporate Existence and Qualification 7
Section 6.2 Subsidiaries and Affiliates 8
Section 6.3 Financial Statements 8
Section 6.4 Events Subsequent to Date of Most Recent
Interim Balance Sheet Included in
Seller Financial Statements 8
Section 6.5 Undisclosed Liabilities 8
Section 6.6 Tax Returns 9
Section 6.7 Real Property 9
Section 6.8 Personal Property - Owned 9
Section 6.9 Personal Property - Leased 9
Section 6.10 Use and Condition of Property;
Environmental Concerns 10
Section 6.11 Restrictive Covenants 10
Section 6.12 Intellectual Property Rights 10
Section 6.13 No Breach, Default or Violation 10
Section 6.14 Litigation and Claims 11
Section 6.15 Material Contracts 11
Section 6.16 Validity of Purchased Contracts 11
Section 6.17 Powers of Attorney 11
Section 6.18 Employment Matters; Employee Benefit
Plans; ERISA Compliance 11
Section 6.19 Insurance 12
Section 6.20 Compliance With Laws; Licenses 12
Section 6.21 Authorization of Agreement 12
Section 6.22 All Material Information 13
Section 6.23 Material Adverse Contract 13
Section 6.24 Shareholders 13
Section 6.25 Consents of Third Parties 13
Section 6.26 Other Approvals 13
Section 6.27 Customer Relations 13
Section 6.28 Knowledge of Seller 14
ARTICLE VII Matters Regarding Securities 14
<PAGE>
ARTICLE VIII Representations and Warranties by Purchaser 15
Section 8.1 Valid Existence and Qualification of Purchaser 15
Section 8.2 Authorization of Agreement by Purchaser 15
ARTICLE IX Indemnification 16
Section 9.1 Indemnification by Seller, Barnett, G.
Nichols and L. Nichols 16
Section 9.2 Right of Setoff 16
Section 9.3 Indemnification by Purchaser 16
Section 9.4 Survival of Covenants, Representations
and Warranties 17
Section 9.5 Payment and Settlement of Amounts Due 17
Section 9.6 Limitation on Indemnities 18
Section 9.7 Notice and Defense of Third Party Claims 18
Section 9.8 Rights of Setoff and Setoff Procedures 19
ARTICLE X Change of Names; Use of Names by Purchaser 21
ARTICLE XI Expenses of the Parties 21
ARTICLE XII Brokers' Commission 21
ARTICLE XIII Miscellaneous 22
Section 13.1 Waivers and Amendments 22
Section 13.2 Entire Agreement 22
Section 13.3 Headings 22
Section 13.4 Notices 22
Section 13.5 Severability 23
Section 13.6 Disclosures on Schedules 23
Section 13.7 Third Parties 23
Section 13.8 Counterparts 24
Section 13.9 Successors and Assigns 24
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 2nd day of February, 1998, effective as of 12:01 a.m. on February 2,
1998 (the "Effective Time"), by and among Summit Temporaries, Inc., a Georgia
corporation ("Seller"), Leslie A. Barnett, a Georgia resident ("Barnett"), Gary
F. Nichols, a Georgia resident ("G. Nichols"), Lyle D. Nichols, a Georgia
resident ("L. Nichols"), and PMI LP II, an Indiana limited partnership
("Purchaser").
PRELIMINARY STATEMENT
Seller desires to sell to Purchaser, and Purchaser desires to purchase
from Seller, substantially all of the non-cash assets owned by Seller or used or
useful in the operations or business of Seller, on the terms and conditions
hereinafter set forth.
Barnett, G. Nichols and L. Nichols are parties to this Agreement as the
sole shareholders of Seller.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and conditions hereinafter set forth, the parties hereto
agree as follows:
ARTICLE I
Purchase and Sale
Section 1.1. Purchased Assets. Seller agrees to and does hereby sell,
transfer, assign, convey and deliver to Purchaser, and Purchaser hereby agrees
to and does hereby purchase and acquire from Seller, free and clear of all
liens, encumbrances, claims, restrictions, security interests, obligations and
liabilities except as otherwise expressly provided herein, all of the assets
that are owned by Seller or that are used or useful by Seller in the operations
or business of Seller at the Effective Time except the Excluded Assets (as
hereinafter defined), including in the assets being purchased and sold
hereunder, without limiting the generality of the foregoing, the following
assets as the same shall exist at the Effective Time (which assets being
acquired are hereinafter collectively called the "Purchased Assets"):
1.1.1. all furniture, furnishings, fixtures, leasehold
improvements, equipment and other fixed assets, including, without
limitation, the assets listed on Schedule 1.1.1;
1.1.2. all of Seller's rights, title, and interest in and to all
software owned by Seller or licensed to Seller by third parties,
including all documentation, source codes, software modules and
enhancements and software in development;
1.1.3. all inventories including marketing materials (including
video tapes, brochures, and the like), spare parts and supplies;
<PAGE>
1.1.4. all of Seller's rights under all leases, contracts
(including software license agreements and maintenance agreements),
agreements, and sales orders, including but not limited to those
leases, contracts, agreements, and sales orders listed on Schedule
1.1.4 (the "Purchased Contracts");
1.1.5. all prepaid and deferred items including prepaid rentals
and deposits;
1.1.6. all operating and financial data and information and books
and records relating to the Purchased Assets or the business or
operations of Seller (wherever located and in every format and media
whatsoever), including without limitation software databases, written
records, personnel files (but only as to personnel hired by Purchaser
and only with their knowledge), files, policies, customer lists,
mailing lists, supplier lists, credit information, correspondence,
designs, slogans, processes, know-how, trade secrets, and other
similar property;
1.1.7. all intellectual property rights of Seller, including
Seller's rights, title and interest in and to all United States and
foreign patents (including all reissues, divisions, continuations and
extensions thereof), patent applications, patent disclosures docketed,
copyrights, trademarks, trademark rights, trademark applications,
trade names, service marks, service mark rights, service mark
applications and licenses;
1.1.8. all registrations, permits, licenses, consents, approvals
and qualifications of Federal, State, local or other government
agencies relating to the business or operations of Seller or the
Purchased Assets;
1.1.9. all rights to warranties and guarantees or other claims
relating to any of the Purchased Assets, including without limitation
rights under agreements for the supply of equipment or leasehold
improvements;
1.1.10. all rights to the use of Seller's name "Summit
Temporaries, Inc." and derivatives thereof, all past corporate names
of Seller and all other names used or previously used by Seller or its
predecessors in its business; and
1.1.11. the goodwill relating to Seller's business.
Section 1.2. Excluded Assets. Seller is retaining and is not selling,
transferring, conveying, assigning or delivering to Purchaser the following
assets (hereinafter collectively called the "Excluded Assets"):
1.2.1. any cash and cash equivalents of Seller on hand or in bank
accounts at the Effective Time;
1.2.2. any marketable securities;
<PAGE>
1.2.3. any deposits related to workers' compensation insurance;
1.2.4. all accounts receivable of Seller for work performed prior
to the Effective Time; and
1.2.5. all notes receivable of Seller at the Effective Time.
ARTICLE II
Purchase Price
The total purchase price for the Purchased Assets (the "Purchase
Price") shall be an amount determined and paid as follows:
(i) Purchaser shall pay $1,700,000 cash to Seller at Closing;
(ii) Purchaser shall deliver at Closing the following notes
issued by Purchaser (collectively, the "Notes" ): (x) a note in the
principal amount of $950,000, with interest payable at the rate of
8.5% per annum, with quarter-annual principal payments over the
four-year period commencing on the date of the Closing and with the
other terms and conditions as set forth in the form of the Promissory
Note attached as Exhibit A to this Agreement; and (y) a note in the
principal amount of $100,000 with quarter-annual principal payments
over the two-year period commencing on the date of the Closing and
with the other terms and conditions set forth in the form of the
Promissory Note attached as Exhibit B to this Agreement (collectively,
the "Notes"), which Notes shall be guaranteed by Personnel Management,
Inc., an Indiana corporation ("PMI"), as guarantor.
ARTICLE III
Assumption of Liabilities
Section 3.1. Assumed Liabilities. Purchaser hereby assumes and agrees
to pay, perform or discharge, to the extent not theretofore paid, performed or
discharged, (i) Seller's liabilities and obligations arising after the Effective
Time under those Purchased Contracts, if any, listed on Schedule 1.1.4, and (ii)
if Purchaser, in its sole discretion and at its option, elects in writing after
the Closing (as hereinafter defined) to assume liabilities or obligations of
Seller under any Purchased Contracts not listed on Schedule 1.1.4, then
Purchaser will assume and pay Seller's liabilities and obligations arising after
the Effective Time under each such nonlisted Purchased Contract that is
expressly assumed in writing by Purchaser, excluding with respect to clauses (i)
and (ii) any liability for default thereunder occurring prior to the Effective
Time and, with respect to liabilities for rent and taxes, excluding any
liability as to periods of time prior to the Effective Time.
<PAGE>
Section 3.2. Excluded Liabilities. Except as otherwise expressly
provided in Section 3.1, Purchaser does not assume and shall not be liable for
any of the liabilities or obligations of Seller, including, without limitation,
Seller's liabilities or obligations which are known or unknown, fixed or
contingent, now existing or hereafter arising (which liabilities and obligations
not assumed by Purchaser are hereinafter referred to as the "Excluded
Liabilities").
ARTICLE IV
Closing and Effective Time
Section 4.1. Closing; Closing Date; Effective Time. The execution of this
Agreement and the taking of various actions in connection therewith as provided
herein with respect to the transactions contemplated hereby (the "Closing")
shall take place on February 2, 1998 (the "Closing Date"). As provided in the
preamble to this Agreement, the transactions contemplated hereby shall be
effective as of 12:01 a.m. (Indianapolis time) on February 2, 1998 (as
previously defined, the "Effective Time").
Section 4.2. Closing Requirements. Seller, Barnett, G. Nichols, L. Nichols
and/or Purchaser, as applicable, shall take the following actions ("Closing
Requirements") at or prior to the Closing:
4.2.1. Seller shall take such actions and execute and deliver
to Purchaser such bills of sale, certificates of title, endorsements,
assignments, or other instruments, with all documentary or transfer
taxes applicable thereto duly paid or provided for, as shall be
necessary to vest in Purchaser at the Effective Time good and
marketable title to the Purchased Assets, subject to no liens,
encumbrances, claims, restrictions, security interests, obligations,
liabilities or rights in any other party whatsoever, except for the
Assumed Liabilities.
4.2.2. Seller shall have delivered to Purchaser a certified
copy (certified by the Secretary of State of Georgia) of Seller's
Articles of Incorporation, including all amendments thereto and
restatements thereof.
4.2.3. Seller shall have delivered to Purchaser a certified
copy (certified by the Secretary or other appropriate officer of
Seller) of Seller's Bylaws, including all amendments thereto and
restatements thereof.
4.2.4. Seller shall have delivered to Purchaser certified
copies (certified by the Secretary or other appropriate officer of
Seller) of resolutions and/or consents setting forth the authorization
and approval of the Board of Directors and shareholders of Seller of
the execution, delivery and performance of this Agreement and all other
agreements, documents and transactions pertaining hereto or
contemplated hereby.
<PAGE>
4.2.5. Each of Seller, Barnett, G. Nichols and L. Nichols
shall have executed and delivered to Purchaser the Noncompetition and
Confidentiality Agreement (as hereinafter defined and substantially in
the form of Exhibit D hereto).
4.2.6. Seller and Purchaser shall have executed and delivered
to one another such assignment and assumption agreements as either of
them shall reasonably request relating to the assignment to and
assumption by Purchaser of the Purchased Contracts and the benefits and
obligations thereunder. Seller shall have obtained and shall provide to
Purchaser the written consent of any third party or parties required in
connection with the assignment of any of the Purchased Contracts.
4.2.7. Seller shall have delivered to Purchaser a certificate
of the Secretary of Seller certifying as to the incumbency of officers
and Directors of Seller, dated the date hereof.
4.2.8. Seller shall have delivered to Purchaser certificates
as of a current date evidencing the corporate existence of Seller in
Georgia.
4.2.9. Purchaser shall have delivered to Seller certified
copies (certified by the Secretary or other appropriate officer of PMI
Administration, Inc., the sole general partner of Purchaser) of
resolutions and/or consents setting forth the authorization and
approval of the Board of Directors of PMI Administration, Inc., as the
general partner of Purchaser, of the execution, delivery and
performance of this Agreement and all other agreements, documents and
transactions pertaining hereto or contemplated hereby.
4.2.10. Purchaser shall pay to Seller the cash and deliver to
Seller the Notes that constitute the Purchase Price.
4.2.11. Purchaser shall deliver to Seller a signed guaranty of
PMI with respect to Purchaser's obligations under the Notes and this
Agreement, which guaranty shall be substantially in the form attached
hereto as Exhibit C.
ARTICLE V
Other Actions, Agreements and Covenants of the Parties
Purchaser, Barnett, G. Nichols, L. Nichols and Seller covenant and agree as
follows:
Section 5.1. Assignment of Contracts. Seller hereby transfers and
assigns to Purchaser all of Seller's rights and benefits under the Purchased
Contracts. With respect to the Real Estate Leases (hereinafter defined),
Purchaser accepts the assignment of each of them subject to the conditions
subsequent that Seller shall, on or before March 2, 1998, provide to Purchaser
the written consent of the lessor under each of the Real Estate Leases to the
assignment thereof by Seller to Purchaser and that the lessor's security
interest provisions be deleted from the Wellington Square Shopping Center lease.
In the event any increase in rent or other charges is imposed by the lessor
under any of the Real Estate Leases in connection with the assignment thereof by
Seller to Purchaser, Seller shall pay to Purchaser, monthly as rent is payable
by Purchaser thereunder, the amount of any such increase that Purchaser is
required to pay on account of such assignment throughout the remaining term
thereof. Seller shall pay all fees, charges and other costs payable to any
lessor under any of the Real Estate Leases in connection with the assignment of
the Real Estate Leases by Seller to Purchaser. Subject to the conditions
subsequent to Purchaser's acceptance of assignment of the Real Estate Leases,
Purchaser shall pay and perform all obligations of the tenant under the Real
Estate Leases accruing and/or attributable to events or circumstances occurring
after the Effective Time, and Seller shall pay and perform all such obligations
accruing and/or attributable to events or circumstances occurring prior to the
Effective Time.
<PAGE>
Section 5.2. Delivery of Property Received After Effective Time. From
and after the Effective Time (i) Seller agrees that it will promptly transfer
and deliver to Purchaser any cash or other property, except Excluded Assets,
that Seller may receive from time to time after the Effective Time relating to
the Purchased Assets, and (ii) Purchaser agrees that it will transfer and
deliver to Seller any cash or other property that Purchaser may receive from
time to time after the Effective Time relating to the Excluded Assets.
Section 5.3. Purchaser Appointed Attorney for Seller. Seller agrees
that, effective as of the Effective Time, it hereby constitutes and appoints
Purchaser, its successors and assigns, the true and lawful agent and
attorney-in-fact of Seller in the name of Purchaser or in the name of Seller,
but for the benefit and at the expense of Purchaser, its successors and assigns,
(i) to institute and prosecute all proceedings which Purchaser may deem proper
to collect, assert or enforce any claim, right, title or interest of any kind in
or to the Purchased Assets; (ii) to defend or compromise any and all actions,
suits or proceedings in respect of any of the Purchased Assets, and to do all
such acts and things in relation thereto as Purchaser, its successors or
assigns, shall deem advisable; and (iii) to take all action which Purchaser, its
successors or assigns, may reasonably deem appropriate to provide for Purchaser,
its successors or assigns, the benefits of or under any of the Purchased Assets
where any required consent of another party to the sale or assignment thereof to
Purchaser pursuant to this Agreement shall not have been obtained. If Purchaser,
in the name of Seller, desires to institute and prosecute any action, suit or
proceeding, or take any other action pursuant to this Section 5.3, Purchaser
shall give Seller 10 days' prior written notice. Seller acknowledges that the
foregoing powers and agency are coupled with an interest and shall be
irrevocable. Purchaser shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers and agency which is
attributable to its interest hereunder, including any amounts payable as
interest in respect thereof.
Section 5.4. Execution of Further Documents. After the Closing, upon
the reasonable request of Purchaser, Seller shall take such additional actions
and execute, acknowledge and deliver all such further documents and instruments,
including without limitation bills of sale, assignments, transfers, conveyances,
powers of attorney and assurances, as may be required to convey and transfer to
and vest in Purchaser and protect Purchaser's right, title and interest in and
to all of the Purchased Assets or as may be appropriate otherwise to carry out
the transactions contemplated by this Agreement.
<PAGE>
Section 5.5. Employment by Purchaser of Seller's Employees. It is
understood and agreed that Purchaser is under no obligation to hire and provide
employment for any of Seller's existing employees, it being Seller's obligation
to terminate such employees, if such is necessary. Purchaser, however, presently
intends to hire some of Seller's existing employees as new hires, and Seller,
Barnett, G. Nichols and L. Nichols shall use their reasonable efforts to aid
Purchaser in engaging such of Seller's agents and employees as are presently
engaged or employed by Seller as Purchaser shall in its sole discretion
determine. Purchaser does not intend to hire and provide employment for Barnett
(although he will perform consulting services as an independent contractor for
Purchaser for a period of time) or Jennifer Hoofnagle, and neither of such
persons shall become employees of Purchaser and Seller shall be responsible for
whatever legal or contractual obligations may exist between Seller and such
persons. Each of Seller, Barnett, G. Nichols and L. Nichols hereby waives the
right to enforce, and covenants that it or he will not enforce or attempt to
enforce, any agreement not to compete or disclose confidential or other
information or similar agreement or restriction made by or applicable to any
shareholder or employee of Summit that is employed by Purchaser and that would
be violated by the employment of such employee by Purchaser or the engagement by
such employee in the continuation of the business formerly conducted by Seller
on behalf of Purchaser.
Section 5.6. Noncompetition and Confidentiality Agreement. As
additional consideration for Purchaser's agreement to buy the Purchased Assets,
Seller, Barnett, G. Nichols and L. Nichols shall each execute and deliver to
Purchaser at Closing an agreement not to compete with Purchaser for a term of
three years, commencing at the Effective Time, substantially in the form
attached hereto as Exhibit D (the "Noncompetition and Confidentiality
Agreement").
Section 5.7. IRS Form 8594. Seller and Purchaser agree that the
Purchase Price shall be allocated as set forth in Schedule 5.7 hereto, and that
neither party will report an allocation inconsistent therewith on Form 8594
subsequently filed with the Internal Revenue Service.
ARTICLE VI
Representations and Warranties by Seller
and Barnett, G. Nichols and L. Nichols
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereunder, Seller, Barnett, G. Nichols and L. Nichols
make the following representations and warranties, each of which shall be deemed
to be independently material and relied upon by Purchaser regardless of any
investigation made or information obtained by Purchaser:
Section 6.1. Corporate Existence and Qualification. Seller (i) is a
corporation duly organized and validly existing under the laws of the State of
Georgia, (ii) has all requisite corporate power and authority to own its
properties and to carry on its business as it is now being conducted; and (iii)
is not required to be qualified to transact business as a foreign corporation in
any jurisdictions. Copies of Seller's Articles of Incorporation, certified by
the Georgia Secretary of State, and Bylaws, including all amendments thereto,
certified by the Secretary of Seller, have been delivered to Purchaser, and such
copies are true, complete and correct in every particular.
<PAGE>
Section 6.2. Subsidiaries. Seller has no subsidiaries.
Section 6.3. Financial Statements. Attached hereto as Schedule 6.3 are
the unaudited Balance Sheet of Seller at December 31, 1997, and the related
unaudited Statement of Operations of Seller for its fiscal year then ended
(which Balance Sheet and Statement of Operations are herein collectively
referred to as the "Seller Financial Statements"), which have been prepared in
accordance with the accrual method of accounting and sound accounting principles
consistently applied with respect to prior periods. The Seller Financial
Statements present fairly the financial condition of Seller at the date
indicated and the results of operations of Seller for the period indicated.
Section 6.4. Events Subsequent to Date of Seller Financial Statements.
To the knowledge of Seller, and except for economic conditions applicable
generally to businesses of the type conducted by Seller, since December 31,
1997, (a) there have been no adverse changes in the condition of the assets,
liabilities, business, operations, prospects or properties of Seller, or in the
financial condition or earnings of Seller as shown in the Seller Financial
Statements, other than changes in the ordinary course of business of Seller
which, individually or in the aggregate, are not material, (b) Seller has not
entered into any material transaction, except for the transactions contemplated
by this Agreement, not in the usual and ordinary course of its business, (c)
Seller's assets, business, operations, prospects or properties have not been
adversely affected in any material way as a result of any fire, accident or
other casualty or by any act of God, (d) Seller has not sold, assigned,
transferred or otherwise disposed of (other than using expendable supplies), or
removed or permitted to be removed from any Real Estate (as hereinafter defined)
or any building or structure thereon, any assets of Seller or any assets used or
useful in its business or operations of the type that, but for such sale or
other event described above, would have been includable in the Purchased Assets;
and (e) Seller has not failed to use reasonable efforts or to act in good faith
(a) to preserve the assets and business of Seller, (b) to keep available the
services of Seller's present employees, agents and representatives, (c) to
preserve the goodwill of Seller's customers, suppliers, and all others having
business with Seller, (d) to conduct and operate Seller's business, and maintain
Seller's books, accounts and records, in the customary manner, in a prudent and
normal fashion, and in the ordinary course of business, or (e) to maintain the
Purchased Assets in the same condition as such assets were in as of December 31,
1997 and preserve Seller's physical properties, business premises, fixtures,
furniture and equipment, ordinary wear and tear excepted.
Section 6.5. Undisclosed Liabilities. Except as reflected on the Seller
Financial Statements, Seller has no material liabilities or obligations, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
and whether known or unknown, and there is no basis for any claim against Seller
for any such liabilities or obligations, except liabilities or obligations
incurred in the ordinary course of business of Seller since December 31, 1997,
including the Assumed Liabilities, none of which individually or in the
aggregate will have a material adverse effect upon the Purchased Assets or the
business or condition, financial or otherwise, of Seller.
<PAGE>
Section 6.6. Tax Returns. Seller has filed with the appropriate
agencies all tax returns and tax reports required by law to be filed by or with
respect to Seller and has paid all taxes due, specifically including all returns
and taxes with respect to employment matters, and to the knowledge of Seller (i)
no audit of any federal, state, county or municipal returns or other tax returns
filed by Seller is in progress, pending or threatened, (ii) there are no unpaid
taxes which are or will become a lien or charge on any of the Purchased Assets
or for which Purchaser may be liable and there are no known or proposed
deficiency assessments in respect of any Federal, State, county, municipal or
other tax return filed by Seller which might adversely affect the Purchased
Assets or Seller's business or for which Purchaser may be liable; and (iii)
there are no taxes, penalties or interest assessed against, due and/or unpaid by
Seller with respect to the Purchased Assets or Seller's business.
Section 6.7. Real Property.
6.7.1. Set forth in Schedule 6.7.1 is a list of the addresses
of each parcel of real property leased or otherwise used by Seller (the
"Real Estate"). Seller has furnished to Purchaser a true and complete
copy of each lease of any Real Estate of which Seller is the lessee or
the lessor (herein referred to as the "Real Estate Leases"), and a
description of the type of use of each such parcel. Seller owns no real
property and has not agreed or committed to purchase any real property.
6.7.2. All Real Estate Leases are in full force and effect and
there exists thereunder no event of default or event which, with the
giving of notice or passage of time or both, would constitute an event
of default by any party thereto. ll of the Real Estate Leases are
assignable to Purchaser only with the consent of the lessors
thereunder. Except as otherwise disclosed on Schedule 6.7.1, Seller has
obtained written consents from the lessors to such assignment to
Purchaser with respect to each of the Real Estate Leases. There are no
delinquencies or alleged delinquencies in the payment of rents or other
amounts owed any landlords under any of the Real Estate Leases.
Section 6.8. Personal Property - Owned. Except as otherwise disclosed
on Schedule 1.4.4, (a) Seller has good and marketable title to all personal
property included in the Purchased Assets reflected on the Seller Financial
Statements (except any sold since the date thereof in the ordinary course of
business), free and clear of all mortgages, liens, security interests, charges,
claims, restrictions and other encumbrances of every kind, and (b) the personal
property included in the Purchased Assets utilized in Seller's business is owned
by Seller and may be used for such purposes without conflict with the rights of
others.
Section 6.9. Personal Property - Leased. Seller has disclosed in
Schedule 1.1.4 all leases under which Seller leases personal property from
others. Seller has furnished Purchaser with a true and complete copy of all such
leases. The property described in such leases is presently used by Seller as
lessee under the terms of such leases and such leases are in full force and
effect, and no defaults exist under such leases and there exists no event which,
with the giving of notice or passage of time or both, would constitute a default
under such leases. All of such leases are assignable to Purchaser hereunder, and
Seller shall obtain all necessary consents to such assignment.
<PAGE>
Section 6.10. Use and Condition of Property; Environmental Concerns.
6.10.1. There are and have been no material violations by
Seller of, and Seller has not received notice of any violation of, any
law, statute, ordinance, regulation, order, rule, judgment, writ,
injunction, decree, permit, registration or other requirement relating
or applicable to the Real Estate or any of Seller's property, assets,
business or operations or the Purchased Assets, including without
limitation violations relating to pollution control or environmental
contamination. To the best of Seller's knowledge, but without
independent investigation, there are no orders, rulings, decrees,
injunctions, judgments or writs of any federal, state or local
government or of any court, department, commission, board, bureau,
agency or other instrumentality thereof known to Seller outstanding
against, or relating or applicable to, Seller or its properties,
business or operations or the Real Estate.
6.10.2. There are no existing facts or circumstances, to
Seller's knowledge, that Seller reasonably believes could form the
basis for the assertion of any claim against Seller in respect of the
business, operations, activities or properties of Seller or the Real
Estate relating to environmental matters.
6.10.3. There are no environmental operating or other similar
environmental permits or authorizations required for the operation of
Seller's business or the Purchased Assets.
Section 6.11. Restrictive Covenants. Except for the Noncompetition and
Confidentiality Agreement and a shareholders agreement among Barnett, G.
Nichols, L. Nichols and Seller, none of Barnett, G. Nichols, L. Nichols or
Seller is subject to any agreements not to compete or similar restrictive
covenants.
Section 6.12. Intellectual Property Rights. There are no patents, patent
applications, inventions, discoveries, trade secrets or other intellectual
property relating to or used in the business of Seller developed by Barnett, G.
Nichols, L. Nichols or any of the other employees of Seller or any other party
to which Seller has or may have a right of ownership or a right of use which
have not been assigned to Seller.
Section 6.13. No Breach, Default or Violation. Seller is not in default
under or in breach or violation of the provisions of any franchise or license,
any provision of its Articles of Incorporation or Bylaws, any promissory note,
indenture or any evidence of indebtedness or security therefor, or any lease,
contract, purchase or other commitment or any other agreement by which it is
bound, which individually or in the aggregate may result in a material adverse
effect on its business or condition, financial or otherwise, or the Purchased
Assets.
<PAGE>
Section 6.14. Litigation and Claims. There is no action, suit, legal or
administrative proceeding, arbitration, investigation or other proceeding or
claim pending or, to the knowledge of Seller threatened, against or affecting
Seller, and Seller is not a party plaintiff in any action, suit, arbitration or
proceeding. No unsatisfied judgment, order or decree has been entered and
remains pending or in effect as to Seller.
Section 6.15. Material Contracts. Other than employment agreements and the
Purchased Contracts listed on Schedule 1.1.4,, there are no material contracts,
agreements, commitments, licenses or other arrangements to which Seller is or
was subject or by which Seller is or was bound, oral or written, expressed or
implied, including without limitation all agreements and instruments relating to
purchase orders or commitments, supply or requirements contracts, agreements
with sales agents or representatives, and franchise or license agreements, that
were material in connection with Seller's business operations during the year
1997 and that are not terminable without financial payment or penalty by reason
thereof on 30 days' notice or less.
Section 6.16. Validity of Purchased Contracts. Each Purchased Contract
other than the Real Estate Leases may be assigned to Purchaser without any
restriction, required consent or other approval (except for such consents or
approvals that Seller has obtained), is in full force and effect and constitutes
the valid, legal and binding obligations of Seller and the other parties
thereto, enforceable in accordance with its terms except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to creditors' rights, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought; Seller is not in
default and to the best knowledge of Seller no other party thereto is in default
(and no event has occurred which with notice or lapse of time or both would
become a default) or has an accrued right of termination thereunder; and no such
contract requiring the purchase by Seller of equipment, furniture, fixtures,
operating supplies or other properties or services is for a quantity in excess
of the normal requirements of Seller's business or at a price in excess of the
generally prevailing price for the item to be purchased.
Section 6.17. Powers of Attorney. There are no outstanding powers of
attorney granted by Seller with respect to its business or operations or the
Purchased Assets.
Section 6.18. Employment Matters; Employee Benefit Plans.
6.18.1. Seller has no employment agreements with its employees
other than pursuant to a written agreement in the form attached hereto
as Schedule 6.18. The hours worked by, payments made to and the working
conditions of the employees of Seller have not been in violation of the
Fair Labor Standards Act or any other applicable federal, state or
local laws, orders or regulations relating to the payment of wages,
conditions of employment, the employment of minors or similar matters;
the practices of Seller in respect to the hiring, working conditions,
promotion, discharge, discipline and rates of pay of its employees have
not been in violation of any federal, state or local laws, executive
orders or regulations, including but not limited to those prohibiting
discrimination for any reason; and there are not as of the date of this
Agreement and there will not be as of the Closing Date any labor
troubles of any kind or nature pending or threatened against Seller.
<PAGE>
6.18.2. Seller does not maintain and has not at any time
within the past five years maintained, and has no liability to any
current employee with respect to, any employee benefit or other plans
that provide retirement, disability, health or other benefits to any of
Seller's employees (collectively, all such plans and practices are the
"Plans"), including all such Plans that are either an "employee pension
benefit plan" or an "employee welfare benefit plan" as such terms are
defined in the Employee Retirement Income Security Act of 1974
(together with all regulations of the Internal Revenue Service, the
United States Department of Labor and the Pension Benefit Guaranty
Corporation thereunder, "ERISA").
Section 6.19. Insurance. Schedule 6.18 is a true, correct and complete
list of all fire, theft, casualty, liability and other insurance policies
insuring Seller and all insurance policies maintained for any of its employees,
specifying the type of coverage, the amount of coverage, the premium, the
insurer and the expiration date of each such policy. Seller is not in default
with respect to any provisions of any such policy, nor has Seller failed to give
any material notice or present any material claim known to Seller under any such
policy in due and timely fashion.
Section 6.20. Compliance with Laws; Licenses. To Seller's knowledge the
business and operations of Seller are and have been in compliance in all
material respects with all applicable laws, rules and regulations of all
authorities, and Seller has obtained all licenses, permits, bonds, insurance and
the like and have made all registrations which are required for such compliance.
A list of all states in which Seller is licensed or registered as an employment
agency, employment leasing agency or similar business, and a copy of each
license or registration listed, is attached hereto as Schedule 6.20.
Section 6.21. Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly and effectively authorized by
all requisite corporate and other action and this Agreement constitutes a legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as may be affected by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally or by equitable principles. Neither the execution, performance
or delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) violate, conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of a lien or encumbrance on any of the
Purchased Assets pursuant to any of the terms, conditions, or provisions of the
Articles of Incorporation or Bylaws of Seller or any note, bond, mortgage,
indenture, deed of trust, license, agreement, or other instrument or obligation
to which Seller is a party or is bound, or (ii) violate any law, rule,
regulation, order, writ, injunction, decree or statute applicable to the
business or operations of Seller or the Purchased Assets.
<PAGE>
Section 6.22. All Material Information. No representation or warranty
made by Seller in this Agreement or any Schedule delivered pursuant to this
Agreement (or any statement made to Purchaser by or on behalf of Seller in
connection with the transactions contemplated by this Agreement) contains any
untrue statement of a material fact or omits to state any material fact
necessary to make such representation, warranty or statement, in light of the
circumstances when made, not misleading. Seller has no knowledge of any existing
or threatened occurrence, event or development which, as far as can be
reasonably foreseen on the basis of information currently available to Seller,
has or would have a material adverse effect upon the business, operations,
prospects, property, assets or financial condition of Seller or the Purchased
Assets.
Section 6.23. Material Adverse Contracts. Seller is not a party to any
contract, agreement or arrangement, oral or written, express or implied,
whatsoever which could materially adversely affect the use or operation of the
Purchased Assets by Purchaser or which could materially adversely affect the
value or prevent or hinder the sale of the Purchased Assets.
Section 6.24. Shareholders. The persons listed in Schedule 6.24
constitute all of the beneficial and record holders of all of the issued and
outstanding shares of capital stock of Seller, each owning that number of shares
listed in Schedule 6.24.
Section 6.25. Consents of Third Parties. Except as otherwise provided
on Schedule 6.7.1, all necessary consents or approvals of third parties to the
transfer and assignment of the Purchased Assets (including the Purchased
Contracts), the absence of which would adversely affect Purchaser's rights
hereunder or thereunder or its utilization of the Purchased Assets or the
conduct of the related businesses, have been obtained (and shown by evidence
satisfactory to Purchaser), including without limitation the consents and
approvals referred to in this Agreement.
Section 6.26. Other Approvals. All necessary consents, approvals,
authorizations or other official actions of all governmental authorities, the
absence of which would materially affect Purchaser's rights hereunder or to the
utilization of the Purchased Assets or conduct of the related business, have
been duly and validly issued or granted and the period for objection, stay or
imposition of any other impediment to the transactions contemplated hereby by
any such governmental authority has expired.
Section 6.27. Customer Relations. Except as disclosed on Schedule 6.27,
(a) Seller has no actual knowledge that any person or organization that has been
a material customer of Seller during all or any portion of the period of time
encompassed by the Seller Financial Statements intends or is likely not to be a
material customer of Purchaser within the twelve month period following the
Effective Time, and (b) Seller has no knowledge of any facts, circumstances or
conditions (other than general economic conditions applicable generally to
Seller's customers) that, either individually or in the aggregate, would cause a
reasonable person to believe that any such material customer of Seller will not,
or likely will not, be a material customer of Purchaser during the twelve month
period following the Effective Time.
<PAGE>
Section 6.28. Knowledge of Seller. With respect to representations and
warranties herein that are made or qualified as being made "to the knowledge of
Seller" or words of similar import, it is understood and agreed that (a) a
person has "knowledge" of a particular matter or fact if such person (i) is
actually aware of such matter or fact or (ii) is actually aware of information
that would cause a prudent person to conclude that such matter or fact is likely
to be true or exist, and (b) matters within the knowledge of any of Barnett, G.
Nichols or L. Nichols or any of the directors, officers or employees of Seller
shall be considered to be within the knowledge of Seller.
ARTICLE VII
Matters Regarding Securities
To induce Purchaser to enter into this Agreement, each of Seller,
Barnett, G. Nichols and L. Nichols hereby acknowledges that he has been advised
by Purchaser that the promissory notes to be received by Seller in partial
payment of the Purchase Price pursuant to this Agreement (the "Securities") have
not been registered under the Securities Act of 1933, as amended (the "1933
Act"), or under the securities laws of the State of Indiana or the State of
Georgia or any other state (collectively, "State Law"), and are being issued
pursuant to this Agreement in reliance upon certain exemptions from such
registration available under the 1933 Act and under applicable State Law
(collectively, the "Exemptions"). In connection with such Exemptions, each of
Seller, Barnett, G. Nichols and L. Nichols severally represents and warrants
that each of the following statements is true and complete as of the date of
this Agreement:
(a) Seller has been provided with, and has made available to each
shareholder of Seller, a copy of the 1997 annual report on
Form 10-K (the "Form 10-K") of Personnel Management, Inc., the
guarantor of the Securities. The opportunity has been made
available to Seller and each of the shareholders of Seller at
a reasonable time prior to the execution and delivery of this
Agreement to ask questions and receive answers from Personnel
Management, Inc., Purchaser and their officers concerning the
terms and conditions of the Securities and the matters
disclosed in the Form 10-K.
(b) With respect to each shareholder of Seller, such shareholder
and Seller represent and warrant that such shareholder's net
worth (joint with spouse of applicable), which includes such
shareholder's ownership in Seller, exceeds one million
dollars, and that such shareholder has been advised by
Purchaser that this information will be relied upon by
Purchaser in establishing the availability of the Exemptions
and that Purchaser and Personnel Management, Inc. may be
damaged if, by reason of the inaccuracy of such information,
the Exemptions are lost in whole or in part.
<PAGE>
(c) It is understood (based upon advice from Purchaser) that the
Securities are subject to restrictions on transferability and
may not be sold, assigned, transferred or pledged except upon
compliance with the provisions of the 1933 Act and State Law,
and that each document evidencing the Securities shall include
a legend detailing such restrictions on transfer.
(d) The Securities are being acquired by Seller for investment for
its own account (not as a nominee or agent for others) and not
with the view to, or for resale in connection with, any
distribution thereof.
ARTICLE VIII
Representations and Warranties by Purchaser
To induce Seller to enter into this Agreement and consummate the
transactions contemplated hereunder, Purchaser makes the following
representations, warranties, covenants and agreements, each of which shall be
deemed to be independently material and relied upon by Seller, regardless of any
investigation made or information obtained by Seller:
Section 8.1. Valid Existence and Qualification of Purchaser. Purchaser
is a limited partnership duly organized and validly existing under the laws of
the State of Indiana, has been admitted to transact business in the State of
Georgia as a foreign limited partnership, and has all requisite partnership
power and authority to acquire and own the Purchased Assets, to assume, pay,
perform and discharge the Assumed Liabilities, and to perform its obligations
under this Agreement.
Section 8.2. Authorization of Agreement by Purchaser. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby have been authorized by all
requisite partnership and other action and this Agreement constitutes a legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as may be affected by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally or by equitable principles. Neither the execution, performance
or delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) violate, conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, any of the terms, conditions, or provisions of the Partnership
Agreement of Purchaser or any note, bond, mortgage, indenture, deed of trust,
license, agreement, or other instrument or obligation to which Purchaser is a
party or is bound, or (ii) violate any law, rule, regulation, order, writ,
injunction, decree or statute applicable to Purchaser.
<PAGE>
ARTICLE IX
Indemnification
Section 9.1. Indemnification by Seller, Barnett, G. Nichols and L. Nichols.
Seller, Barnett, G. Nichols and L. Nichols hereby jointly and severally covenant
and agree to indemnify Purchaser and its successors and assigns against and hold
them harmless from any and all liabilities, losses, deficiencies, damages,
expenses and costs (including, without limitation, reasonable counsel fees and
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by this indemnity or that would, if successfully asserted by the
claimant, be covered by this indemnity, or incurred in connection with
successfully asserting, proving and collecting indemnity payments pursuant to
this Article IX with respect to matters not involving defense of third-party
claims) accruing from or arising at any time as a result of or out of:
9.1.1. Any inaccuracies in or breaches of the representations,
warranties, covenants, obligations or agreements made or to be
complied with or performed by Barnett, G. Nichols, L. Nichols or
Seller pursuant to this Agreement or in any agreement, schedule,
certificate or instrument delivered by or on behalf of Barnett, G.
Nichols, L. Nichols or Seller pursuant hereto, including without
limitation the Noncompetition and Confidentiality Agreements;
9.1.2. Any and all of Seller's liabilities other than the Assumed
Liabilities;
9.1.3. Any claims for brokerage commissions or placement or
finders' fees in connection with the transactions contemplated by this
Agreement insofar as such claims shall be alleged to be based on
arrangements made by or on behalf of Seller;
9.1.4. Any operations or business conducted, commitment made,
service rendered or condition existing or any action taken or omitted
by or on behalf of Seller on or prior to the Effective Time, except
for liabilities expressly assumed by Purchaser pursuant to Section 3.1
hereof; and
Section 9.2. Right of Setoff. Subject to the provisions of Section 9.8,
Purchaser shall have the right to setoff any amounts with respect to which
Purchaser is entitled to indemnification pursuant to Section 9.1 against any
amounts not yet paid under the Notes. The exercise of such right of setoff by
Purchaser in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under the Notes. Neither the exercise
nor the failure to exercise such right of setoff will constitute an election of
remedies or limit Purchaser in any manner in the enforcement of any other
remedies that may be available to Purchaser.
Section 9.3. Indemnification by Purchaser. Purchaser shall indemnify
Seller, Barnett, G. Nichols, L. Nichols and their respective successors and
assigns against and hold them harmless from any and all liabilities, losses,
deficiencies, damages, expenses and costs (including, without limitation,
reasonable counsel fees and costs and expenses incurred in the investigation,
defense or settlement of any claims covered by this indemnity or incurred in
connection with successfully asserting, proving and collecting indemnity
payments pursuant to this Article IX with respect to matters not involving
defense of third-party claims) accruing from or arising at any time as a result
of or out of:
<PAGE>
9.3.1. Any claims for brokerage commissions or placement or
finders' fees in connection with the transactions contemplated by this
Agreement insofar as such claims shall be alleged to be based on
arrangements made by or on behalf of Purchaser.
9.3.2. Any failure of Purchaser to pay, discharge or perform the
Assumed Liabilities;
9.3.3. Any liabilities asserted by any third party arising out of
any act or failure to act by Purchaser after the Effective Time,
except Excluded Liabilities and liabilities as to which Seller is
obligated to indemnify Purchaser pursuant to Section 9.1; and
9.3.4. Any inaccuracies in or breaches of the representations,
warranties, covenants, obligations or agreements made or to be
complied with or performed by Purchaser pursuant to this Agreement.
Section 9.4. Survival of Covenants, Representations and Warranties.
Subject to the proviso clause below, each of the covenants, representations and
warranties contained herein or in any agreement, schedule, certificate or
instrument delivered pursuant hereto shall survive the Closing and remain in
full force and effect, regardless of any investigation made by or on behalf of
any party hereto, until but not after 11:59 p.m. (Indianapolis time) on the date
that is two years from the date of this Agreement; provided, however, that the
representations and warranties contained in Sections 6.6, 6.8 and 6.10 shall
survive indefinitely regardless of any investigation made by or on behalf of any
party hereto.
Section 9.5. Payment and Settlement of Amounts Due.
9.5.1. Any amount due to Purchaser from Seller, Barnett, G.
Nichols and/or L. Nichols pursuant to any of the provisions of this
Article IX shall be paid to Purchaser by Seller, Barnett, G. Nichols
and/or L. Nichols within 10 days of demand therefor. If such amounts
are not paid to Purchaser when due, Purchaser shall be entitled, in
addition to all other available remedies, to offset such amounts
against amounts otherwise payable to Seller pursuant to Section 9.2.
9.5.2. Any amount due to Seller, Barnett, G. Nichols and/or L.
Nichols from Purchaser pursuant to any of the provisions of this
Article IX shall be paid to Seller, Barnett, G. Nichols and/or L.
Nichols by Purchaser within 10 days of demand therefor.
9.5.3. Any amounts not paid when due pursuant to the provisions
of this Section 9.5 shall bear interest from the date of demand at the
rate of 15 percent per annum.
<PAGE>
Section 9.6. Limitation on Indemnities.The obligations of Purchaser,
Seller, Barnett, G. Nichols and L. Nichols with respect to payments made with
respect to obligations to indemnify a person or entity under Section 9.1 or
Section 9.3, and the corresponding rights of such person or entity to be
indemnified thereunder (which obligations and corresponding rights are referred
to herein as the "Indemnities"), are subject, as applicable, to the following
limitations:
(a) The maximum amount of aggregate Indemnities that
Seller, Barnett, G. Nichols and L. Nichols
collectively shall be obligated to pay under this
Article IX shall be $2,750,000.
(b) The maximum amount of aggregate Indemnities that
Purchaser shall be obligated to pay under this
Article IX shall be $500,000.
Section 9.7. Notice and Defense of Third Party Claims.
(a) If any third party shall notify any party hereto that is
or may be entitled to indemnification hereunder (an "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification under this Article IX against
any of the parties who are or may be obligated to provide
indemnification to the Indemnified Party with respect thereto
(collectively, the parties who are or may be obligated to provide
indemnification are the "Indemnifying Parties"), then the Indemnified
Party shall promptly notify in writing each of the Indemnifying Parties
of the Third Party Claim; provided, however, that no delay on the part
of the Indemnified Party in notifying the Indemnifying Parties shall
relieve the Indemnifying Parties from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Parties are thereby
prejudiced; and provided, further, that only one such notification need
be provided to the Indemnifying Parties with respect to a Third Party
Claim regardless of the number of Indemnified Parties involved.
(b) The Indemnifying Parties shall have the right, at their
own expense, to defend the Indemnified Party against the Third Party
Claim with counsel of their choice reasonably satisfactory to the
Indemnified Party so long as: (i) the Indemnifying Parties notify the
Indemnified Party in writing within 15 days after the Indemnified Party
has given notice of the Third Party Claim that the Indemnifying Parties
will undertake to defend the Indemnified Party with respect to such
Third Party Claim at the expense of the Indemnifying Parties; (ii) the
Indemnifying Parties provide the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Parties will have the financial resources to defend against the Third
Party Claim and fulfill their indemnification obligations hereunder;
(iii) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief; (iv) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party; and (v) the Indemnifying
Parties conduct the defense of the Third Party Claim actively and
diligently.
<PAGE>
(c) So long as the Indemnifying Parties are conducting the
defense of the Third Party Claim in accordance with Section 9.7(b), (i)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Parties,
which consent shall not be unreasonably withheld, and (iii) the
Indemnifying Parties will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld.
(d) In the event the Indemnifying Parties fail or cease to
satisfy any of the conditions of Section 9.7(b), (i) the Indemnified
Party may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in any
manner it reasonably may deem appropriate without consulting with, or
obtaining the consent of, any of the Indemnifying Parties in connection
therewith; (ii) the Indemnifying Parties will reimburse the Indemnified
Party promptly for the costs, including, without limitation, reasonable
attorneys' fees, of defending against the Third Party Claim; and (iii)
the Indemnifying Parties will remain responsible for any Indemnity owed
to any Indemnified Party relating in any manner to such Third Party
Claim.
Section 9.8. Rights of Setoff and Setoff Procedures.
(a) With respect to the exercise by Purchaser of any right of
setoff against the Notes in accordance with Section 9.2 or otherwise
(an "Indemnity Setoff"), the procedures set forth in this Section 9.8
shall govern the rights and obligations of Seller and Purchaser
relating to such Indemnity Setoff.
(b) With respect to any Indemnities as to which the liability
of Seller or any other party obligated to indemnify Purchaser
(collectively, the "Indemnitors") and the extent of such liability have
been established by either (i) the written acknowledgment, agreement or
confirmation of Seller with respect thereto, or (ii) the judgment or
award of any court or arbitrator having jurisdiction, then in any such
case Purchaser shall be entitled to make an Indemnity Setoff against
the Notes with respect to such liability as a matter of right without
advance notice thereof to the Indemnitors; provided, however, that
written notice of the making of such Indemnity Setoff, describing in
reasonable detail the relevant factual circumstances, shall be given to
the Indemnitors at the time such Indemnity Setoff is made.
<PAGE>
(c) With respect to an Indemnity Setoff to be made other than
pursuant to Section 9.8(b), Purchaser shall give written notice to the
Indemnitors of the intention to make an Indemnity Setoff (the "Setoff
Notice") at least 15 days prior to the date as of which such Indemnity
Setoff is intended to be made (the "Setoff Date"). The Setoff Notice
shall describe in reasonable detail the factual circumstances relating
to the claimed Indemnities as to which an Indemnity Setoff is to be
made (including the amount thereof) and the obligation of the Purchaser
against which the Indemnity Setoff will be applied. If Purchaser does
not receive written notice from any of the Indemnitors prior to the
Setoff Date that the intended Indemnity Setoff is disputed by the
Indemnitors, Purchaser may make the intended Indemnity Setoff in
accordance with the description thereof in the Setoff Notice and shall
give written notice to the Indemnitors that such Indemnity Setoff has
been made. If Purchaser does receive written notice prior to the Setoff
Date that an intended Indemnity Setoff is disputed by the Indemnitors,
Purchaser may elect to make such Indemnity Setoff in escrow pursuant to
Section 9.8(d) or may, without waiving any rights to recover the
Indemnities as to which an Indemnity Setoff was intended or to make a
further claim for an Indemnity Setoff with respect thereto, and without
being otherwise adversely affected with respect thereto, take no
further action with respect to such Indemnity Setoff as to which a
Setoff Notice was given to the Indemnitors.
(d) With respect to an intended Indemnity Setoff that is
disputed by the Indemnitors in accordance with Section 9.8(c),
Purchaser may effect such Indemnity Setoff by delivering the funds that
are the intended subject of such Indemnity Setoff to a commercial bank
maintaining an office in Atlanta, Georgia (the "Bank"), to be held by
the Bank pending the resolution of such dispute pursuant to this
Section 9.8(d). The Indemnitors and Purchaser shall execute and deliver
to one another and the Bank an appropriate Escrow Agreement whereby the
Bank agrees to receive and distribute such funds as provided herein. A
disputed Indemnity Setoff as to which Purchaser deposits the funds with
the Bank shall be resolved by submitting the matter to a court of
competent jurisdiction or, if mutually agreeable by the parties, to
arbitration. The Bank shall distribute all funds held by it pursuant to
the Escrow Agreement in accordance with the decision or award made in
such court or arbitration proceeding.
(e) All earnings on funds held by the Bank shall be reported
as taxable income of Purchaser. Upon resolution of a dispute as to the
entitlement of Purchaser to effect an Indemnity Setoff with respect to
any funds paid to the Bank by Purchaser, the Bank shall pay over to the
Indemnitors all earnings (including earnings on earnings) on funds
received by the Bank that are paid by the Bank to the Indemnitors
pursuant to the court or arbitration decision or award; provided,
however, earnings on escrowed sums otherwise payable under the Notes
shall be in lieu of accrued interest on such sums under the Notes after
the date such sums were paid by Purchaser to the Bank (payment to the
Bank shall be considered as the payment of such sums to the Indemnitors
for purposes of the Notes and calculating the balances thereof).
<PAGE>
(f) Payment of any funds to the Bank by Purchaser pursuant to
this Section 9.8 shall, for purposes of determining the performance by
Purchaser of its obligations under this Agreement and the Notes, be
deemed to constitute performance to the same extent as if such funds
had been paid or delivered to Seller rather than the Bank.
ARTICLE X
Change of Names; Use of Names by Purchaser
As soon as is reasonably possible after the Effective Time Seller shall
change its corporate name to a name other than, and not similar to, the name
"Summit Temporaries, Inc.," and shall file appropriate documents reflecting such
name change in Georgia and in each state where qualified to do business as a
foreign corporation and furnish a copy of all such filings to Purchaser;
provided, however, that Seller may continue to use such name for a reasonable
period, not to exceed ninety days from the date of this Agreement, solely for
the purpose of facilitating the collection of accounts and notes receivable.
Seller shall coordinate any such name change and the filings in connection
therewith with Purchaser and its counsel in to ensure that Purchaser obtains all
rights to the name in all jurisdictions in which Seller has used such name. From
and after the Effective Time Purchaser shall have full right, power and
authority to use, and Seller hereby consents to the use by Purchaser or
Purchaser's designee of, the name "Summit Temporaries, Inc.," and any
abbreviations or combinations thereof, all past corporate names of Seller and
other names used or previously used by Seller or its predecessors in their
businesses, and any word or trade name used by Seller prior to the Effective
Time in the conduct of its business, without restriction or adverse claim of
Seller, any of its affiliates, or any person claiming by, through or under
Seller. After the Effective Time, Seller shall not use any such name without
Purchaser's written consent.
ARTICLE XI
Expenses of the Parties
Each party shall pay its expenses, including the expenses of its legal
and accounting representatives, in connection with the origin, negotiation,
execution and performance of this Agreement, except as otherwise provided
herein. Purchaser shall pay any and all sales and transfer taxes with respect to
the transactions contemplated hereby. Seller shall pay any and all federal and
state income or other taxes attributable to Seller arising as a result of the
transactions contemplated hereby.
ARTICLE XII
Brokers' Commission
The parties hereby agree and represent and warrant to each other that
there are no claims for brokerage commissions, or placement or finders' fees, in
connection with the transactions contemplated by this Agreement, except for
those payable to James Selton, which shall be paid by Purchaser.
<PAGE>
ARTICLE XIII
Miscellaneous
Section 13.1. Waivers and Amendments. This Agreement may be amended or
modified, and its terms or conditions may be waived, only by a written
instrument executed by the parties hereto, or in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by any party of the breach of any
term or condition contained in this Agreement in any one or more instances shall
be deemed to be, or construed as, a further or continuing waiver of any breach,
or a waiver of the breach of any other term or condition contained herein. The
parties reserve the right to amend or modify this Agreement, or waive the terms
or conditions hereof, without the consent of any third person (natural or
otherwise).
Section 13.2. Entire Agreement. This Agreement (and the Schedules and
Exhibits hereto which are hereby incorporated and made a part hereof) and all
certificates, agreements, documents and instruments delivered contemporaneously
and in connection herewith constitute the entire understanding of the parties
relative to the subject matter hereof and supersede all prior agreements and
undertakings between or among any of the parties relating to the subject matter
hereof. Any reference herein to this Agreement shall be deemed to include the
Schedules and Exhibits hereto.
Section 13.3. Headings. The table of contents and descriptive headings
in this Agreement and on the Schedules and Exhibits are inserted for convenience
only and shall not constitute a part of, nor affect the meaning or
interpretation of, this Agreement or any section or subsection hereof.
Section 13.4. Notices. Any notice, election or demand to be given
hereunder to any of the parties by another shall be in writing and personally
delivered or sent by prepaid same day or overnight courier or registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Purchaser, PMI LP II
addressed to: c/o Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
Attn: President
With a copy to: Leagre Chandler & Millard
9100 Keystone Crossing, Suite 800
Box 40609
Indianapolis, Indiana 46240-0609
Attn: Robert V. Kixmiller
<PAGE>
If to Seller, Summit Temporaries, Inc.
addressed to: c/o Gary F. Nichols
6925 Brandon Mill Road
Atlanta, Georgia 30328
If to Leslie A. Barnett, Leslie A. Barnett
addressed to: 235 Mark Trail
Atlanta, Georgia 30328
If to Gary F. Nichols, Gary F. Nichols
addressed to: 6925 Brandon Mill Road
Atlanta, Georgia 30328
If to Lyle Nichols, Lyle D. Nichols
addressed to: 329 Broadland
Atlanta, Georgia 30342
With a copy, as to Oliver C. Murray, Jr.
any of Seller, Leslie A. Suite 1190
Barnett, Gary F. Nichols 1349 W. Peachtree Street, N.E.
or Lyle Nichols, to: Atlanta, Georgia 30309-2956
Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other parties in the manner
herein provided for giving notice.
Section 13.5. Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein. Should any particular covenant in this Agreement be
held unreasonable or unenforceable for any reason, including without limitation
the time period, geographical area, or scope of activity covered by such
covenant, then such covenant shall be given effect and enforced to whatever
extent would be reasonable and enforceable.
Section 13.6. Disclosures on Schedules. Facts disclosed on any Schedule to
this Agreement shall be considered as disclosed for purposes of all of the
representations and warranties contained in Article VI.
Section 13.7. Third Parties. Except as otherwise provided herein, nothing
herein expressed or implied is intended or shall be construed to confer upon or
give to any person or entity other than the parties hereto and their respective
successors or assigns, any rights or remedies under or by reason of this
Agreement.
<PAGE>
Section 13.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original.
Section 13.9. Successors and Assigns. All the terms, covenants, and
conditions of this Agreement shall be binding upon, and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
assigns.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PMI LP II, an Indiana Limited Partnership
By: PMI ADMINISTRATION, INC.,
its General Partner
By: /s/ Don R. Taylor
Don R. Taylor, President
SUMMIT TEMPORARIES, INC.
By /s/ Gary F. Nichols
Gary F. Nichols, President
Attest:
By /s/ Leslie A. Barnett
Leslie A. Barnett, Secretary
/s/ Leslie A. Barnett
Leslie A. Barnett, Individually
/s/ Gary F. Nichols
Gary F. Nichols, Individually
/s/ Lyle D. Nichols
Lyle D. Nichols, Individually
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF JOHNSON )
Before me, a Notary Public in and for said County and State, on the 9th day
of February, 1998, personally appeared Don R. Taylor, the President of PMI
Administration, Inc., sole General Partner of PMI LP II, who acknowledged the
execution of the above and foregoing Asset Purchase Agreement for and on behalf
of such corporation.
WITNESS my hand and Notarial Seal.
/s/ Dorothy J. Hoefener
NOTARY PUBLIC, a Resident of
Shelby County, Indiana
Dorothy J. Hoefener
My Commission Expires: Name Printed
2-3-01
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
Before me, a Notary Public in and for said County and State, on the 12th
day of February, 1998, personally appeared Gary F. Nichols, the President of
Summit Temporaries, Inc., who acknowledged the execution of the above and
foregoing Asset Purchase Agreement for and on behalf of such corporation.
WITNESS my hand and Notarial Seal.
/s/ Renee P. Buchanan
NOTARY PUBLIC, a Resident of
Paulding County, Georgia
Renee P. Buchanan
My Commission Expires: Name Printed
1-2-99
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
Before me, a Notary Public in and for said County and State, on the 12th
day of February, 1998, personally appeared Leslie A. Barnett, who acknowledged
the execution of the above and foregoing Asset Purchase Agreement to be his
voluntary act and deed.
WITNESS my hand and Notarial Seal.
/s/ Renee P. Buchanan
NOTARY PUBLIC, a Resident of
Paulding County, Georgia
Renee P. Buchanan
My Commission Expires: Name Printed
1-2-99
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
Before me, a Notary Public in and for said County and State, on the 12th
day of February, 1998, personally appeared Gary F. Nichols, who acknowledged the
execution of the above and foregoing Asset Purchase Agreement to be his
voluntary act and deed.
WITNESS my hand and Notarial Seal.
/s/ Renee P. Buchanan
NOTARY PUBLIC, a Resident of
Paulding County, Georgia
Renee P. Buchanan
My Commission Expires: Name Printed
1-2-99
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
Before me, a Notary Public in and for said County and State, on the 12th
day of February, 1998, personally appeared Lyle D. Nichols, who acknowledged the
execution of the above and foregoing Asset Purchase Agreement to be his
voluntary act and deed.
WITNESS my hand and Notarial Seal.
/s/ Renee P. Buchanan
NOTARY PUBLIC, a Resident of
Paulding County, Georgia
Renee P. Buchanan
My Commission Expires: Name Printed
1-2-99
<PAGE>
LIST OF SCHEDULES TO
ASSET PURCHASE AGREEMENT
Schedule 1.1.1 Fixed Assets
Schedule 1.1.4 Purchased Contracts
Schedule 5.7 Allocation of Purchase Price
Schedule 6.3 Seller Financial Statements
Schedule 6.7.1 Real Property -- Leased
Schedule 6.18 Employee Contract Form
Schedule 6.19 Insurance
Schedule 6.20 Licenses
Schedule 6.24 Shareholders
Schedule 6.27 Customer Relations
<PAGE>
LIST OF EXHIBITS TO
ASSET PURCHASE AGREEMENT
Exhibit A -- Note in Principal Amount of $950,000 (Article II)
Exhibit B -- Note in Principal Amount of $100,000 (Article II)
Exhibit C -- Form of Guaranty
Exhibit D -- Form of Noncompetition and Confidentiality Agreement
(Section 5.6)
EXHIBIT 10.1
SCHEDULE OF OPTION GRANTS AND EXERCISES
UNDER 1994 DIRECTOR STOCK OPTION PLAN
(THROUGH JANUARY 31, 1998)
<TABLE>
<CAPTION>
Number of
Number of Date of Option Option Date Shares for
Grantee Options Granted* Grant Price* Period ExercisedWhich Exercised
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Cook, Jr. 550 1/31/95 $12.09 1/30/2000 1/28/98 550
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000 1/28/98 550
1,100 10/31/95 9.08 10/30/2000 1/28/98 700
825 01/31/96 5.90 1/30/2001
550 04/30/96 8.75 04/29/2001
550 07/31/96 6.98 07/30/2001
550 10/31/96 7.63 10/30/2001
550 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
550 7/31/97 9.63 7/30/2002
550 10/31/97 11.74 10/30/2002
1,100 1/31/98 11.79 1/30/2003
<PAGE>
David L. Swider 825 1/31/95 $9.95 1/30/2000 1/28/98 825
(for the quarter
ended 10/31/94)
1,100 1/31/95 12.09 1/30/2000 1/28/98 1,100
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
1,100 01/31/96 5.90 01/30/2001
1,100 04/30/96 8.75 04/29/2001
825 07/31/96 6.98 07/30/2001
825 10/31/96 7.63 10/30/2001
825 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
825 7/31/97 9.63 7/30/2002
825 10/31/97 11.74 10/30/2002
1,650 1/31/98 11.79 1/30/2003
<PAGE>
Richard L. VonDerHaar 825 1/31/95 $9.95 1/30/2000
(for the quarter
ended 10/31/94)
1,100 1/31/95 12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000 1/28/98 1,100
1,100 01/31/96 5.90 01/30/2001 1/28/98 550
550 04/30/96 8.75 04/29/2001 1/28/98 275
825 07/31/96 6.98 07/30/2001 1/28/98 403
825 10/31/96 7.63 10/30/2001 1/28/98 400
825 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
825 7/31/97 9.63 7/30/2002
825 10/31/97 11.74 10/30/2002
1,650 1/31/98 11.79 1/30/2002
Max K. DeJonge 550 10/31/95 $9.08 10/30/2000 1/28/98 550
550 01/31/96 5.90 01/30/2001 1/28/98 275
550 04/30/96 8.75 04/29/2001 1/28/98 275
550 07/31/96 6.98 07/30/2001 1/28/98 275
550 10/31/96 7.63 10/30/2001 1/28/98 275
550 1/31/97 9.45 1/30/2002
550 4/30/97 9.88 4/30/2002
550 7/31/97 9.63 7/30/2002
550 10/31/97 11.74 10/30/2002
550 1/31/98 11.79 1/30/2003
</TABLE>
*All grants prior to April 24, 1995 retroactively adjusted for ten percent
stock dividend paid on that date.
EXHIBIT 10.2
AGREEMENT AND RIGHT OF FIRST REFUSAL
REGARDING PURCHASE OF STOCK
This AGREEMENT AND RIGHT OF FIRST REFUSAL REGARDING PURCHASE OF STOCK (this
"Agreement") is made and entered into as of the 18th day of December, 1997, by
and between PERSONNEL MANAGEMENT, INC., an Indiana corporation (the
"Corporation"), and DON R. TAYLOR ("Taylor").
RECITALS
A. Taylor is employed by the Corporation as its Chief Executive Officer
and is the sole owner of all of the issued and outstanding shares of capital
stock of JBD Real Estate, Inc., an Indiana corporation ("JBD"). JBD owns four
parcels of improved real estate, one parcel located in each of Columbus,
Franklin, Rushville and Shelbyville, Indiana (collectively, the "JBD Real
Estate"), which parcels are currently leased to the Corporation for use as
branch offices of the Corporation.
B. The Corporation and Taylor desire and intend that all shares of the
capital stock of JBD which Taylor now owns or subsequently may acquire (the "JBD
Shares") be purchased by the Corporation upon the occurrence of certain events
and that the Corporation have a right of first refusal to purchase the JBD
Shares in the event Taylor intends to sell the JBD Shares.
C. The Corporation and Taylor have determined that it is in their
mutual best interests to restrict the transfer, and to provide for the purchase
and sale, of the JBD Shares as provided herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and undertakings contained in this Agreement and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Corporation and Taylor agree as follows:
1. Section Restrictions Relating to JBD Shares. Except as is otherwise
provided in this Agreement, Taylor may not voluntarily or involuntarily sell,
assign, exchange, convey, transfer by gift or otherwise, encumber, pledge,
distribute, appoint or otherwise dispose of in any manner (any and all such
events being collectively sometimes referred to herein as a "transfer") any JBD
Shares, or any interest therein, in whole or in part, and any such transfer or
attempted transfer shall be void ab initio and shall be wholly ineffective for
any purpose. Additionally, Taylor shall not cause or permit any additional
shares of capital stock or other securities of JBD to be issued to anyone other
than himself. In the event of an involuntary transfer of any JBD Shares to any
person pursuant to a judicial order or decree or otherwise by operation of law
notwithstanding the foregoing prohibition against any such transfer, the
provisions of this Agreement shall continue to be applicable to such JBD Shares
in the hands of the transferee thereof and such transferee's successors and
assigns.
<PAGE>
Section 2. Permitted Sale of JBD Shares. Subject to the provisions of
this Section, Taylor may sell the JBD Shares in a bona fide sales transaction as
provided in this Section. If at any time during the term of this Agreement
Taylor receives and desires to accept a bona fide written offer (the "Offer") to
purchase all (but not less than all) of the JBD Shares from an offeror that is
an unrelated and unaffiliated party (the "Proposed Transferee"), Taylor shall
comply with the provisions of this Section and the Corporation shall have a
right of first refusal (or option) to purchase such JBD Shares that shall be
exercisable as follows:
(a) Taylor shall give written notice (the "Notice") to the
Corporation of his intent to sell all of the JBD Shares, which Notice
shall be given in the manner provided in Section 10. Taylor shall
include in and/or with the Notice a copy of the Offer, the name and
address of the Proposed Transferee, the proposed sales price, and all
other terms and conditions of such proposed sale of the JBD Shares.
(b) The Corporation shall have the option to purchase all, but
not less than all, of the JBD Shares at a price equal to the proposed
sales price pursuant to the Offer. The Corporation's option shall
expire upon the earlier of (i) sixty (60) days following the
Corporation's receipt of the Notice or (ii) the earlier receipt by
Taylor of written notice from the Corporation that it has decided not
to exercise its option to purchase pursuant to this Section.
(c) For purposes of this Section, an option may be exercised
only by giving written notice of such exercise to Taylor in accordance
with the requirements of Section 10. Such notice to Taylor must be
given within the applicable time provided above for the exercise of
such option. A sale of the JBD Shares pursuant to the exercise of the
Corporation's option under this Section shall be consummated within the
period of time set forth in Section 5, with payment of the purchase
price for such JBD Shares to be made in cash pursuant to Section 6 or,
at the Corporation's option, in the manner provided in the Offer.
(d) If the Corporation fails to exercise its option to
purchase the JBD Shares, then Taylor may sell the JBD Shares to the
Proposed Transferee referred to in the Notice, subject to the following
conditions and limitations:
(i) such sale may be made only to the Proposed Transferee
and at the price and upon the terms and conditions included in
and/or with the Offer and the Notice; and
(ii) such sale may be made only within ninety (90) days
following the expiration of the Corporation's option to purchase
under this Section.
<PAGE>
Section 3. Sale Upon Triggering Events. Upon the occurrence of a
Triggering Event as defined in this Section, Taylor (or his involuntary
transferee) shall sell and the Corporation shall purchase all of the JBD Shares
at the purchase price (as hereinafter defined) determined in accordance with
Section 4 of, and upon the other terms and conditions as provided in, this
Agreement. For purposes of this Agreement, each of the following is a
"Triggering Event":
(a) Taylor's employment by the Corporation terminates for
any reason including, but not limited to, Taylor's disability or
death.
(b) Following a "Change of Control of the Corporation" as
defined hereinbelow, the Corporation ceases leasing or occupying
one or more parcels of the JBD Real Estate. For purposes of this
Agreement, a "Change of Control of the Corporation" shall be
deemed to have occurred if, after the date of this Agreement,
either:
(i) there shall have been consummated (1) any
reorganization, consolidation or merger of the Corporation
in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Corporation's
common stock shall have been converted into cash, securities
or other property, or (2) any sale, lease, exchange or other
transfer, directly or indirectly, in one transaction or a
series of related transactions, of all, or substantially
all, of the assets of the Corporation and its consolidated
subsidiaries unless, following such reorganization, merger,
consolidation, or transfer of assets:
(A) more than 60 percent of the then outstanding shares
of common stock of the Corporation resulting from such
reorganization, merger or consolidation (or of the
corporation receiving the transferred assets) (the
"Continuing Corporation") and of the then outstanding voting
securities of the Continuing Corporation entitled to vote
generally in the election of Directors are then beneficially
owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the outstanding shares of common
stock of the Corporation and of the outstanding voting
securities of the Corporation entitled to vote generally in
the election of Directors immediately prior to such
reorganization, merger, consolidation or transfer of assets
in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger,
consolidation or transfer of assets, of the outstanding
shares of common stock of the Corporation and of the
outstanding voting securities of the Corporation,
<PAGE>
(B) no "person" (as that term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (excluding (1) the
Corporation, (2) any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
entity controlled, directly or indirectly, by the
Corporation or the Continuing Corporation and (3) any
"person" beneficially owning, immediately prior to such
reorganization, merger, consolidation or transfer of assets,
directly or indirectly, 20 percent or more of the
outstanding shares of common stock of the Corporation or the
outstanding voting securities of the Corporation)
beneficially owns, directly or indirectly, 20 percent or
more of, respectively, the then outstanding shares of common
stock of the Continuing Corporation or of the combined
voting power of the then outstanding voting securities of
the Continuing Corporation entitled to vote generally in the
election of Directors, and
(C) at least a majority of the members of the Board of
Directors of the Continuing Corporation were members of the
Board of Directors of the Corporation at the time of the
execution of the initial agreement providing for such
reorganization, merger, consolidation or transfer of assets;
(ii) any "person" or "group" of persons (as those terms
are used in Sections 13(d) and 14(d)(2) of the Exchange Act,
and Regulations 13D-G and 14D thereunder) shall have become
the "beneficial owner" (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 20 percent or
more of the combined voting power of the Corporation's then
outstanding voting securities entitled to vote generally in
the election of Directors (excluding (i) the Corporation,
(ii) any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any entity controlled,
directly or indirectly, by the Corporation, (iii) any
"person" who, on the date of this Agreement, is the
"beneficial owner", directly or indirectly, of 20 percent or
more of the Corporation's outstanding common stock, and (iv)
any "group" of persons that includes Taylor); or
(iii) during any period of two consecutive years,
individuals who constitute the Board of Directors of the
Corporation at the beginning of such period cease for any
reason to constitute at least a majority thereof, excluding
individuals whose election, or nomination for election by
the Corporation's shareholders was approved by a vote of at
least two-thirds of the Directors then still in office who
were Directors at the beginning of such period, unless, for
this purpose, any such new Director's initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 or
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board of Directors
of the Corporation.
<PAGE>
Section 4. Determination of Purchase Price.
(a) The purchase price for the JBD Shares purchased by the
Corporation from Taylor upon the happening of a Triggering Event shall
be the net book value of the JBD Shares as of the date of the
Triggering Event (as determined in accordance with generally accepted
accounting principles consistently applied), adjusted to reflect the
fair market value (rather than the book value) of the JBD Real Estate
on the date of the Triggering Event assuming, for purposes of
determining such fair market value, the existence of a remaining
five-year lease period by the Corporation at the then-current rental
amount and terms (irrespective of the actual remaining lease period of
the lease that may then be in effect) with respect to each parcel of
the JBD Real Estate.
(b) The fair market value of the JBD Real Estate as of the
date of a Triggering Event shall be an amount as mutually agreed by the
Corporation and Taylor, or if they are unable to so agree such fair
market value shall be determined by the appraisal process described in
Sections 4(c) and 4(d).
(c) If the Corporation and Taylor are unable to reach
agreement regarding the fair market value of the JBD Real Estate within
twenty (20) days following the occurrence of the Triggering Event, they
may select, by mutual agreement, a qualified appraiser or appraisers to
determine such fair market value. If they have not agreed on the
selection of such appraiser or appraisers within thirty (30) days
following the occurrence of the Triggering Event, then at any time
following the expiration of such thirty (30) day period the independent
auditor of the Corporation may be requested by either the Corporation
or Taylor to select, and shall promptly select and engage on behalf of
the Corporation, one or more independent appraisers which, in such
auditor's professional judgment, possesses suitable qualifications and
expertise to appraise the fair market value of the JBD Real Estate.
(d) An appraiser or appraisers selected as provided herein
shall be requested to complete such appraisal as promptly as is
practicable and to provide a report of such appraisal to both the
Corporation and Taylor. The fair market value of the JBD Real Estate,
as determined, as the case may be, by the mutual agreement of the
Corporation and Taylor, by the appraiser or appraisers selected by the
Corporation and Taylor, or by the appraiser or appraisers selected by
the Corporation's independent auditors, shall be binding on all
parties. All fees and costs associated with the appraisal of the JBD
Real Estate shall be paid by the Corporation.
Section 5. Closing. Except as otherwise agreed in writing, the
consummation of a purchase and sale of the JBD Shares pursuant to this Agreement
(the "Closing") shall occur (i) not later that thirty (30) days following the
Corporation's exercise of its option to purchase with respect to a sale under
Section 2, and (ii) not later than ninety (90) days following the occurrence of
the Triggering Event (or as soon thereafter as the purchase price has been
determined if a delay in the Closing is necessary in order to obtain an
appraisal of the JBD Real Estate) with respect to a sale under Section 3. The
Closing shall be held at the principal office of the Corporation in Greenwood,
Indiana, or at such other place as may be agreed by the Corporation and Taylor.
<PAGE>
Section 6. Actions at Closing. At the Closing:
(a) The Corporation shall pay to Taylor the purchase price for
the JBD Shares as determined pursuant to the applicable provisions of
this Agreement.
(b) Taylor shall transfer the JBD Shares to the Corporation
free and clear of all liens, security interests or other outstanding
interests of any kind whatsoever, and shall deliver properly endorsed
stock certificates and all other documents that the Corporation may
reasonably require for the purpose of establishing Taylor's title to
the JBD Shares and effecting the transfer of the JBD Shares to the
Corporation.
(c) Both the Corporation and Taylor shall take or cause to be
taken such other actions, and shall execute and deliver or shall cause
to be executed and delivered such other documents, instruments and
agreements, as shall be reasonably requested by the other party to
effect compliance with the provisions of this Agreement and to complete
the purchase and sale of the JBD Shares as provided herein.
Section 7. Representations and Warranties of the Corporation. In order
to induce Taylor to enter into this Agreement and to consummate the transactions
contemplated hereby, the Corporation makes the following representations and
warranties:
(a) The Corporation is duly organized and validly existing as
a corporation under the laws of the State of Indiana and has full
corporate power and authority to enter into and perform this Agreement.
(b) The execution of this Agreement and consummation of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of the Corporation.
(c) The Corporation has the power and authority to execute
this Agreement, and this Agreement constitutes a legal, valid and
binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms. The Corporation is not a
party to or subject to any agreement or other instrument or any law,
rule or regulation which could prevent or hinder it from, or require
any consent to, the execution of this Agreement or prevent or hinder
its performance hereunder, except that the consent of KeyBank National
Association is required under the Corporation's credit agreement with
such bank.
<PAGE>
Section 8. Representations, Warranties and Covenants of Taylor. In
order to induce the Corporation to enter into this Agreement and to consummate
the transactions contemplated hereby, Taylor makes the following representations
and warranties to, and covenants with, the Corporation as follows:
(a) JBD is a corporation duly organized and validly existing
under the laws of the State of Indiana.
(b) The authorized capital stock of JBD consists of 10,000
shares of common stock, no par value per share, all of which are issued
and outstanding. There are no preemptive, preferential or other rights
to subscribe for shares of common stock of JBD and there are no
outstanding options, warrants or any other rights of any description,
contractual or otherwise, entitling any person or entity to be issued
any class of security of JBD.
(c) Taylor is the President and sole shareholder of JBD and
does and will continue to own 100 percent of the outstanding capital
stock of JBD free and clear of all liens, security interests and
encumbrances of any kind whatsoever, and Taylor has and shall continue
to have an unrestricted right to sell and transfer the JBD Shares
pursuant to this Agreement.
(d) Except for liens on the JBD Real Estate securing a loan or
loans reflected on the books of JBD, JBD owns and will continue to own
each parcel of the JBD Real Estate free and clear of all title defects
or objections, mortgages, pledges, liens, claims, charges, security
interests, conditional sales agreements, easements (other than utility
easements) and other encumbrances of any nature whatsoever except for
liens for current taxes which have not yet become due and such
imperfections of title and non-monetary encumbrances, if any, as are
not substantial in character, amount or extent and do not and will not
materially hinder or detract from the use or value of the JBD Real
Estate.
(e) JBD does not presently engage in any business activity or
hold any assets, and Taylor shall cause JBD not to engage in any
business activity or acquire any assets, other than in connection with
the ownership and leasing of the JBD Real Estate in the ordinary course
of business.
(f) Taylor shall cause JBD to maintain complete and accurate
books and records in accordance with generally accepted accounting
principles consistently applied.
(g) Neither the execution, performance or delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will violate, conflict with, or constitute a default under any other
agreement to which JBD or Taylor is a party or by which either is
bound.
<PAGE>
(h) The JBD Shares have been and are duly authorized, validly
issued, fully paid and nonassessable.
(i) Taylor shall provide to the Corporation, within twenty
(20) days after the occurrence of a Triggering Event, a balance sheet
with respect to JBD as of the date of the occurrence of the Triggering
Event, and Taylor hereby covenants, represents and warrants that such
balance sheet, when furnished, will have been prepared in accordance
with generally accepted accounting principles consistently applied and
will present fairly the financial condition of JBD as of the date
thereof.
Section 9. Survival of Representations, Warranties and Covenants. Each
of the representations, warrants and covenants contained herein shall survive
the execution and delivery of this Agreement and the Closing and shall remain in
full force and effect indefinitely, regardless of any investigation made by or
on behalf of any party hereto.
Section 10. Notices. Any notice or other communication required or
permitted under this Agreement shall be in writing and shall be personally
delivered or sent by pre-paid same day or overnight courier or registered or
certified mail, return receipt requested, postage prepaid, addressed as follows
(or addressed to such other address as may be given in writing by any party to
the other):
To the Corporation: Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
To Taylor: 11123 Sloop Court
Indianapolis, Indiana 46236
Notice that is mailed or sent by overnight courier shall be deemed to have been
given (but not received) when deposited in the U.S. Mail or delivered to such
overnight courier, as the case may be, as provided herein.
Section 11. Restrictive Legend. Taylor shall cause an executed copy of
this Agreement to be kept on file by JBD at its principal office located at
11123 Sloop Court, Indianapolis, Indiana 46236. As long as this Agreement is in
effect, Taylor agrees that he shall cause any certificates evidencing ownership
of JBD Shares, whether existing at the date of this Agreement or issued or
reissued subsequent thereto, to bear a legend substantially in the following
form:
The sale, assignment, exchange, conveyance, transfer by gift or
otherwise, encumbrance, pledge, distribution, appointment or other
disposition of the shares of stock represented by this certificate is
subject to the terms and restrictions contained in an Agreement and
Right of First Refusal Regarding Purchase of Stock (the "Agreement")
dated December 18, 1997, by and between Personnel Management, Inc. and
Don R. Taylor. A copy of the Agreement, including any amendments
thereto, is on file and available for inspection at the principal
offices of JBD Real Estate, Inc. Any attempted transfer or other
disposition of the shares represented hereby in violation of the
Agreement will be void and of no effect whatsoever.
<PAGE>
Section 12. Modification and Waiver. This Agreement may be modified or
amended only by an instrument in writing executed by the Corporation and Taylor.
No waiver of any of the provisions hereof shall be effective as against the
party purportedly making such waiver unless such waiver is evidenced by a
writing signed by such party.
Section 13. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not effect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect to the fullest extent permitted by law.
Section 14. Headings; Pronouns. The titles to Sections in this
Agreement are intended solely for convenience and no provision of this Agreement
is to be construed by reference to the title of any Section. All pronouns in
this Agreement and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the person or
persons may require.
Section 15. Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Indiana, notwithstanding the fact that one or more of the parties hereto may
become a resident or citizen of a different state.
Section 16. Binding Effect. This Agreement shall be binding upon an
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, beneficiaries, devisees and legal representatives. For purposes
of this Agreement, a successor of the Corporation shall include, without
limitation, any corporation or corporations acquiring directly or indirectly all
or substantially all of the assets of the Corporation whether by merger,
consolidation, sale or otherwise (and such successor shall thereafter be deemed
the "Corporation" for purposes of this Agreement).
<PAGE>
IN WITNESS WHEREOF, the Corporation and Taylor have executed this
Agreement as of the date and year first above written.
PERSONNEL MANAGEMENT, INC.
By /s/ Gary F. Hentschel
Gary F. Hentschel
President and Chief Operating Officer
ATTEST:
/s/ Robert R. Millard
Robert R. Millard
Vice President of Finance and
Administration, Chief Financial and
Accounting Officer, Treasurer and
Secretary
/s/ Don R. Taylor
Don R. Taylor
EXHIBIT 10.3
AMENDED CHANGE OF CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS AMENDED CHANGE OF CONTROL SEVERANCE BENEFITS AGREEMENT (this
"Agreement") is made and entered into as of the 18th day of December, 1997, by
and between PERSONNEL MANAGEMENT, INC., an Indiana corporation (the
"Corporation"), and DON R. TAYLOR (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Corporation previously executed a Change of
Control Severance Benefits Agreement dated November 8, 1995 (the "Original
Agreement"); and
WHEREAS, the Executive and the Corporation mutually desire to replace the
Original Agreement with this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
promises contained herein and other valuable consideration, including services
performed and to be performed by the Executive, it is hereby agreed by and
between the parties as follows:
Section 1. Effect; Effective Date. This Agreement supersedes and
replaces the Original Agreement effective as of the date hereof. Anything in
this Agreement to the contrary notwithstanding, neither this Agreement nor any
provision hereof shall be operative unless and until there has been a Change of
Control of the Corporation (as "Change of Control of the Corporation" is defined
in Section 7 of this Agreement). Upon a Change of Control of the Corporation,
this Agreement shall become operative immediately.
Section 2. Employment. This Agreement shall not be construed as
creating a contract of employment between the Executive and the Corporation. The
Executive is, however, employed by the Corporation at the time this Agreement is
executed.
Section 3. Obligation to Provide Severance Entitlement. If the
Executive's employment with the Corporation is terminated under any
circumstances other than a Disqualifying Termination (as defined in Section 9 of
this Agreement) and if such termination of employment occurs concurrently with
or within three months immediately preceding or twenty-four months immediately
following a Change of Control of the Corporation (the "Termination Period"),
then the Corporation shall provide to the Executive a severance benefit in the
manner and amount as provided in Section 4 of this Agreement (the "Severance
Entitlement").
Section 4. Manner and Amount of Severance Entitlement. If the
Corporation is obligated to provide a Severance Entitlement to the Executive
pursuant to Section 3 of this Agreement, the manner in which the Corporation
shall provide such Severance Entitlement and the amount thereof shall be as
follows:
<PAGE>
(a) The Corporation shall cancel all indebtedness of the
Executive to the Corporation (if any) up to, but not in excess of, the
amount of the Severance Entitlement (as provided in Section 4(c)
below).
(b) If the amount of indebtedness of the Executive to the
Corporation cancelled pursuant to Section 4(a) above is less than the
amount of the Severance Entitlement to be provided to the Executive by
the Corporation, the Corporation shall pay to the Executive, by check,
an amount of money equal to the difference between the amount of the
Executive's indebtedness that is cancelled and the amount of the
Severance Entitlement to be provided to the Executive.
(c) The Severance Entitlement to be provided by the
Corporation to the Executive shall consist of the cancellation of
indebtedness and/or the payment of money as provided in Sections 4(a)
and 4(b) above. The aggregate dollar amount of the Severance
Entitlement, whether in debt cancellation or money or both, shall be
equal to three times the greater of (i) the current (as of the time
Executive becomes entitled to the Severance Entitlement) amount of base
salary being paid by the Corporation to the Executive on an annualized
basis, or (ii) the highest amount of base salary paid by the
Corporation to the Executive for any full calendar year during which
the Executive was employed by the Corporation; provided, however, that
if such Severance Entitlement, either alone or together with other
payments which the Executive has the right to receive from any PMI
Company, would constitute an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), then the Corporation shall pay an additional
amount of money to the Executive that will equal (based upon the
Executive's good faith representations of the Executive's income tax
position for the year(s) of payment(s)) the sum of (i) all excise tax
imposed upon the Executive by Section 4999 of the Code and (ii) all
additional state and federal income taxes attributable to the
additional payments to the Executive pursuant to this proviso clause
(including all state and federal taxes on the additional income tax
payments). The determination of the amounts of such payments pursuant
to the immediately preceding proviso shall be made by the Corporation
in good faith, and such determination shall be conclusive and binding.
Section 5. Provision of Severance Entitlement. With respect to a
Severance Entitlement to be provided to the Executive hereunder, the Corporation
shall provide to the Executive satisfactory written evidence of the amount of
any debt cancellation, and shall pay to the Executive any money, to which the
Executive is entitled as a Severance Entitlement not later than 30 days after
the later of (i) the occurrence of the Change of Control of the Corporation or
(ii) the termination of the Executive's employment.
Section 6. Withholding. The Corporation may withhold or otherwise
deduct from any Severance Entitlement to be provided hereunder all federal,
state, city, county or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
<PAGE>
Section 7. Change of Control of the Corporation. For purposes of this
Agreement, a "Change of Control of the Corporation" shall be deemed to have
occurred if, after the date hereof, either:
(a) there shall have been consummated (i) any
reorganization, consolidation or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation or pursuant
to which shares of the Corporation's common stock shall have been
converted into cash, securities or other property, or (ii) any sale,
lease, exchange or other transfer, directly or indirectly, in one
transaction or a series of related transactions, of all, or
substantially all, of the assets of the Corporation and its
consolidated subsidiaries unless, following such reorganization,
merger, consolidation, or transfer of assets;
(i) more than 60 percent of the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
(or of the corporation receiving the transferred assets) (the
"Continuing Corporation") and of the then outstanding voting
securities of the Continuing Corporation entitled to vote
generally in the election of Directors are then beneficially
owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the outstanding shares of common stock of the
Corporation and of the outstanding voting securities of the
Corporation entitled to vote generally in the election of
Directors immediately prior to such reorganization, merger,
consolidation or transfer of assets in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or transfer of assets,
of the outstanding shares of common stock of the Corporation
and of the outstanding voting securities of the Corporation,
(ii) no "person" (as that term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) (excluding (aa) the Corporation, (bb) any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any entity controlled,
directly or indirectly, by the Corporation or the Continuing
Corporation and (cc) any "person" beneficially owning,
immediately prior to such reorganization, merger,
consolidation or transfer of assets, directly or indirectly,
20 percent or more of the outstanding shares of common stock
of the Corporation or the outstanding voting securities of the
Corporation) beneficially owns, directly or indirectly, 20
percent or more of, respectively, the then outstanding shares
of common stock of the Continuing Corporation or of the
combined voting power of the then outstanding voting
securities of the Continuing Corporation entitled to vote
generally in the election of Directors, and
(iii) at least a majority of the members of
the Board of Directors of the Continuing Corporation were
members of the Board of Directors of the Corporation at the
time of the execution of the initial agreement providing for
such reorganization, merger, consolidation or transfer of
assets;
<PAGE>
(b) any "person" or "group" of persons (as those
terms are used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations
13D-G and 14D thereunder) shall have become the "beneficial owner"
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20 percent or
more of the combined voting power of the Corporation's then outstanding
voting securities entitled to vote generally in the election of
Directors (excluding (i) the Corporation, (ii) any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or
any entity controlled, directly or indirectly, by the Corporation,
(iii) any "person" who, on the date of this Agreement, is the
"beneficial owner", directly or indirectly, of 20 percent or more of
the Corporation's outstanding common stock, and (iv) any "group" of
persons that includes Don R. Taylor); or
(c) during any period of two consecutive years,
individuals who constitute the Board of Directors of the Corporation at
the beginning of such period cease for any reason to constitute at
least a majority thereof, excluding individuals whose election, or
nomination for election by the Corporation's shareholders was approved
by a vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of such period, unless, for this
purpose, any such new Director's initial assumption of office occurs as
a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 or Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors
of the Corporation.
Section 8. Successive Changes of Control. In the event a Change of
Control of the Corporation occurs but the Executive remains employed by the
Corporation until the expiration of the Termination Period following the
occurrence thereof, this Agreement shall nevertheless remain in effect and be
applicable with respect to any subsequent or further Change of Control of the
Corporation that may thereafter occur. In the event a Change of Control of the
Corporation occurs subsequent to the occurrence of a prior Change of Control of
the Corporation as to which the Termination Period following same has not yet
expired, this Agreement shall survive and continue in effect and the twenty-four
month period following the subsequent Change of Control of the Corporation shall
become the relevant period for determining the Executive's entitlement to a
Severance Entitlement hereunder. For purposes of determining whether a
subsequent Change of Control of the Corporation has occurred after the
occurrence of a prior Change of Control of the Corporation under clauses (b) or
(c) of Section 7 hereof (i) the increase in ownership percentage of the
Corporation's voting securities held by a "person" or "group" whose ownership of
such voting securities has resulted in a prior Change of Control of the
Corporation shall not constitute an additional or subsequent Change of Control
of the Corporation, (ii) each "group" of "persons" shall be separate and
distinct from any other "group" even though one or more "persons" may be
included in common in more than one "group", and (iii) a determination as to
whether a Change of Control of the Corporation has occurred under clause (c) of
Section 7 shall be made each time the composition of the Board of Directors of
the Corporation changes based on the then applicable two year "look back"
period.
<PAGE>
Section 9. Disqualifying Termination. For purposes of this Agreement, a
"Disqualifying Termination" of the Executive's employment with the Corporation
shall mean a termination of the Executive's employment under any of the
following circumstances:
(a) termination of the Executive's employment by the
Corporation for Cause (as defined in Section 10); or
(b) termination of the Executive's employment by the
Corporation for Disability (as defined in Section 11); or
(c) termination of the Executive's employment by the
Executive without Good Reason (as defined in Section 12) to do so; or
(d) termination of the Executive's employment as a
result of the death of the Executive.
(As provided in Section 3, the Executive shall not be entitled to a Severance
Entitlement under this Agreement if the Executive's employment with the
Corporation was terminated under circumstances constituting a Disqualifying
Termination.)
Section 10. Termination by the Corporation for Cause. For purposes of
this Agreement, the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for "Cause" only if the Corporation
terminated the Executive's employment with the Corporation for any of the
following reasons:
(a) the continued failure of the Executive to
substantially perform any of the Executive's significant duties or
responsibilities in connection with the Executive's employment (other
than any such failure resulting from the Executive's incapacity due to
physical or mental illness) if such failure is not corrected or cured
within 30 days after demand for substantial performance is made in
writing upon the Executive by the Corporation specifically identifying
the manner in which the Corporation believes the Executive has failed
to substantially perform one or more of the Executive's significant
duties or responsibilities (repetition of the same failure as
previously described in any such written demand after the 30-day cure
period following such written demand shall be deemed to be "continued
failure" to substantially perform by the Executive); or
(b) any act that constitutes on the part of the
Executive common law fraud or dishonesty regardless of whether such
fraud or dishonesty resulted in, or was intended to result in, a
benefit to the Executive at the expense of the Corporation; or
(c) the conviction of the Executive of, or the plea
by the Executive of nolo contendere to, a felony or a crime involving
moral turpitude; or
(d) any continuing violation by the Executive in any
material respect of any of the Corporation's policies or of any term or
provision of any employment or other agreement between the Executive
and the Corporation which, in any such case, is not corrected or abated
by the Executive within 30 days after written notice of such violation
is given by the Corporation to the Executive (repetition of the same
violation as previously described in any such written notice after the
30 day correction period following such written notice shall be deemed
to be a "continuing violation" by the Executive); or
<PAGE>
(e) the Executive's unexcused total abandonment or
neglect of the Executive's duties and responsibilities in connection
with the Executive's employment with the Corporation (other than
absences due to illness, physical or mental incapacity, vacations, or
other excused absences) for a continuous period of ten working days.
Section 11. Termination by the Corporation for Disability. For purposes
of this Agreement, the Executive shall be considered to have suffered a
"Disability" and the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for Disability if such termination
is made after (and is identified by the Corporation as being on account of the
occurrence of) either of the following:
(a) the actual receipt by the Executive of income
continuation benefits or similar benefits pursuant to a disability
insurance policy as a result of a determination under such policy that
the Executive is disabled, or
(b) the Executive's inability by reason of physical
and/or mental incapacity to substantially perform the essential
functions of the Executive's duties and responsibilities to the
Corporation on a full-time basis for a period of 26 consecutive weeks.
Section 12. Termination by the Executive for Good Reason.
(a) For purposes of this Agreement, and subject to the time
limitations and in compliance with the requirements of subsection (b)
of this Section, the Executive shall have "Good Reason" to terminate
the Executive's employment with the Corporation upon the occurrence
during the Termination Period, without the Executive's express written
consent or agreement thereto, of any of the following:
(i) the Executive is demoted to a materially lesser
position within the Corporation (considering, in making a
determination as to whether a demotion has occurred, the
Executive's status, offices, titles, reporting requirements,
authority, duties, responsibilities and other relevant
factors) or the Corporation takes any other action that a
reasonable person in the Executive's position would conclude
is inconsistent in any material and adverse respect with the
Executive's position within the Corporation;
(ii) the Executive's base salary is reduced or the
Executive is denied a fringe benefit provided to the
Corporation's management employees generally;
<PAGE>
(iii) the Executive is required by the Corporation to
be based at any office or location outside of either Johnson
County or Marion County, Indiana, or any county contiguous to
Marion County, Indiana; or
(iv) the Corporation fails to comply with and satisfy
Section 17.
(b) Upon the occurrence during the Termination Period of any
facts or circumstances that constitute Good Reason for the Executive to
terminate his employment with the Corporation as described in
subsection (a) of this Section, the Executive shall, within sixty (60)
days after the occurrence thereof, give written notice to the
Corporation of the facts or circumstances that constitute Good Reason,
describing in such written notice the facts or circumstances in
question with reasonable particularity. The Corporation shall have a
period of thirty (30) days after receipt of such written notice from
the Executive in which to take such actions, if any, as the Corporation
shall deem necessary, appropriate or desirable, in its judgment, to
remedy, eliminate or otherwise "cure" the facts or circumstances in
question in such a manner that Good Reason no longer exists by virtue
thereof. In the event the Corporation shall fail to remedy, eliminate
or cure such facts or circumstances in such a manner that Good Reason
no longer exists by virtue thereof within such thirty (30) day period,
then after the expiration of such thirty (30) day period the Executive
may terminate his employment with the Corporation for Good Reason (if
Good Reason does, in fact, exist) by written notice of such termination
to the Corporation; provided, however, that any such termination must
be effected by the Executive on or before the earlier of (i) the date
that is sixty (60) days after the date the Corporation receives the
written notice required hereunder from the Executive, or (b) the
expiration of the Termination Period.
Section 13. No Mitigation. The Executive is not required to mitigate
the amount of the Severance Entitlement to be provided by the Corporation
pursuant to this Agreement by seeking other employment or otherwise, nor shall
the amount of the Severance Entitlement payable pursuant to this Agreement be
reduced by any compensation earned by the Executive as the result of employment
by another employer, or which might have been earned by the Executive had the
Executive sought other employment, after the date of termination of the
Executive's employment with the Corporation.
Section 14. Notices. Any notice, request, demand and other
communication to be given hereunder shall be in writing and personally delivered
or mailed in the continental United States by registered or certified mail,
postage prepaid, at the address stated below or to such changed address as the
addressee may have given by a similar notice:
To the Company: Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
To the Executive: Don R. Taylor
11123 Sloop Court
Indianapolis, Indiana 46236
<PAGE>
Section 15. Legal Expenses. In the event that either of the parties
institutes any legal action to enforce its rights under, or to recover damages
for breach of, this Agreement, the prevailing party shall be entitled to recover
from the other party any actual expenses for attorney's fees, costs, expenses
and disbursements incurred by the prevailing party.
Section 16. Successors to the Executive. This Agreement shall be
binding upon and shall inure to the benefit of the Executive, the Executive's
heirs, beneficiaries, devisees, successors and legal representatives. No right
or interest to or in any payments hereunder shall be assignable by the Executive
except assignments to the Corporation in accordance with applicable law;
provided, however, that this provision shall not preclude the Executive from
designating one or more beneficiaries to receive any amount that may be payable
after the Executive's death and shall not preclude the legal representative of
the Executive's estate from assigning any right hereunder to the person or
persons entitled thereto under the Executive's will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of intestacy
applicable to the Executive's estate. The term "beneficiaries" as used in this
Agreement shall mean a beneficiary or beneficiaries so designated to receive any
such amount, or, if no beneficiary has been so designated, the legal
representative of the Executive's estate. In the event of the Executive's death,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to the Executive's legal representative or, where appropriate, to the
Executive's beneficiary or beneficiaries.
Section 17. Successors to the Corporation. This Agreement shall be
binding upon and inure to the benefit of the Corporation and any successor of
the Corporation, including, without limitation, successor acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Corporation whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed the "Corporation" for the purposes of this
Agreement). The Corporation shall require and shall cause any such successor of
the Corporation to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place.
Section 18. Headings; Pronouns. The titles to sections in this
Agreement are intended solely for convenience and no provision of this Agreement
is to be construed by reference to the title of any section. All pronouns in
this Agreement and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the person or
persons may require.
Section 19. Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Indiana.
<PAGE>
Section 20. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment, modification
or waiver shall be authorized by the Board of Directors of the Corporation or
any authorized committee of the Board of Directors of the Corporation and shall
be agreed to in writing, signed by the Executive and by an officer of the
Corporation thereunto duly authorized. Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a subsequent breach of such
condition or provision or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.
Section 21. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect to the fullest extent permitted by law.
Section 22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute the same instrument.
Section 23. PMI Companies. Although the Corporation is the only one of
the PMI Companies formally executing this Agreement, the Executive understands,
acknowledges and agrees that this Agreement is made for the benefit of all of
the PMI Companies, as applicable, each of whom shall be entitled to enforce this
Agreement as their respective interests may appear.
IN WITNESS WHEREOF, the Corporation and the Executive have executed
this Agreement as of the date and year first above written.
PERSONNEL MANAGEMENT, INC.
By /s/ Gary F. Hentschel
Gary F. Hentschel
President
ATTEST:
/s/ Robert R. Millard
Robert R. Millard
Secretary
"EXECUTIVE"
/s/ Don R. Taylor
Don R. Taylor
EXHIBIT 10.4
AMENDED CHANGE OF CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS AMENDED CHANGE OF CONTROL SEVERANCE BENEFITS AGREEMENT (this
"Agreement") is made and entered into as of the 18th day of December, 1997, by
and between PERSONNEL MANAGEMENT, INC., an Indiana corporation (the
"Corporation"), and GARY F. HENTSCHEL (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Corporation have previously executed a
Change of Control Severance Benefits Agreement dated July 15, 1996 (the
"Original Agreement"); and
WHEREAS, the Executive and the Corporation mutually desire to replace the
Original Agreement with this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
promises contained herein and other valuable consideration, including services
to be performed by the Executive, it is hereby agreed by and between the parties
as follows:
Section 1. Effect; Effective Date. This Agreement supersedes and
replaces the Original Agreement effective as of the date hereof. Anything in
this Agreement to the contrary notwithstanding, neither this Agreement nor any
provision hereof shall be operative unless and until there has been a Change of
Control of the Corporation (as "Change of Control of the Corporation" is defined
in Section 7 of this Agreement). Upon a Change of Control of the Corporation
this Agreement shall become operative immediately.
Section 2. Employment. This Agreement shall not be construed as
creating a contract of employment between the Executive and the Corporation. The
Executive is, however, employed by the Corporation at the time this Agreement is
executed.
Section 3. Obligation to Provide Severance Entitlement. If the
Executive's employment with the Corporation is terminated under any
circumstances other than a Disqualifying Termination (as defined in Section 9 of
this Agreement) and if such termination of employment occurs concurrently with
or within three months immediately preceding or twenty-four months immediately
following a Change of Control of the Corporation (the "Termination Period"),
then the Corporation shall provide to the Executive a severance benefit in the
manner and amount as provided in Section 4 of this Agreement (the "Severance
Entitlement").
Section 4. Manner and Amount of Severance Entitlement. If the
Corporation is obligated to provide a Severance Entitlement to the Executive
pursuant to Section 3 of this Agreement, the manner in which the Corporation
shall provide such Severance Entitlement and the amount thereof shall be as
follows:
<PAGE>
(a) The Corporation shall cancel all indebtedness of the
Executive to the Corporation (if any) up to, but not in excess of, the
amount of the Severance Entitlement (as provided in Section 4(c)
below).
(b) If the amount of indebtedness of the Executive to the
Corporation cancelled pursuant to Section 4(a) above is less than the
amount of the Severance Entitlement to be provided to the Executive by
the Corporation, the Corporation shall pay to the Executive, by check,
an amount of money equal to the difference between the amount of the
Executive's indebtedness that is cancelled and the amount of the
Severance Entitlement to be provided to the Executive.
(c) The Severance Entitlement to be provided by the
Corporation to the Executive shall consist of the cancellation of
indebtedness and/or the payment of money as provided in Sections 4(a)
and 4(b) above. The aggregate dollar amount of the Severance
Entitlement, whether in debt cancellation or money or both, shall be
equal to three times the greater of (i) the current (as of the time
Executive becomes entitled to the Severance Entitlement) amount of base
salary being paid by the Corporation to the Executive on an annualized
basis, or (ii) the highest amount of base salary paid by the
Corporation to the Executive for any full calendar year during which
the Executive was employed by the Corporation; provided, however, that
if such Severance Entitlement, either alone or together with other
payments which the Executive has the right to receive from any PMI
Company, would constitute an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), then the Corporation shall pay an additional
amount of money to the Executive that will equal (based upon the
Executive's good faith representations of the Executive's income tax
position for the year(s) of payment(s)) the sum of (i) all excise tax
imposed upon the Executive by Section 4999 of the Code and (ii) all
additional state and federal income taxes attributable to the
additional payments to the Executive pursuant to this proviso clause
(including all state and federal taxes on the additional income tax
payments). The determination of the amounts of such payments pursuant
to the immediately preceding proviso shall be made by the Corporation
in good faith, and such determination shall be conclusive and binding.
Section 5. Provision of Severance Entitlement. With respect to a
Severance Entitlement to be provided to the Executive hereunder,the Corporation
shall provide to the Executive satisfactory written evidence of the amount of
any debt cancellation, and/or shall pay to the Executive any money, to which the
Executive is entitled as a Severance Entitlement not later than 30 days after
the later of (i) the occurrence of the Change of Control of the Corporation or
(ii) the termination of the Executive's employment.
Section 6. Withholding. The Corporation may withhold or otherwise
deduct from any Severance Entitlement to be provided hereunder all federal,
state, city, county or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
<PAGE>
Section 7. Change of Control of the Corporation. For purposes of this
Agreement, a "Change of Control of the Corporation" shall be deemed to have
occurred if, after the date hereof either:
(a) there shall have been consummated (i) any reorganization,
consolidation or merger of the Corporation in which the Corporation is
not the continuing or surviving corporation or pursuant to which
shares of the Corporation's common stock shall have been converted
into cash, securities or other property, or (ii) any sale, lease,
exchange or other transfer, directly or indirectly, (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation and its
consolidated subsidiaries unless, following such reorganization,
merger, consolidation, or transfer of assets,
(A) more than 60 percent of the then outstanding shares of
common stock of the corporation resulting from such
reorganization, merger or consolidation (or of the corporation
receiving the transferred assets) (the "Continuing Corporation")
and of the then outstanding voting securities of the Continuing
Corporation entitled to vote generally in the election of
Directors are then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the outstanding shares of
common stock of the Corporation and of the outstanding voting
securities of the Corporation entitled to vote generally in the
election of Directors immediately prior to such reorganization,
merger, consolidation or transfer of assets in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or transfer of assets, of
the outstanding shares of common stock of the Corporation and of
the outstanding voting securities of the Corporation,
(B) no "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
(excluding (aa) the Corporation, (bb) any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or
any entity controlled, directly or indirectly, by the Corporation
or the Continuing Corporation and (cc) any "person" beneficially
owning, immediately prior to such reorganization, merger,
consolidation or transfer of assets, directly or indirectly, 20
percent or more of the outstanding shares of common stock of the
Corporation or the outstanding voting securities of the
Corporation) beneficially owns, directly or indirectly, 20
percent or more of, respectively, the then outstanding shares of
common stock of the Continuing Corporation or of the combined
voting power of the then outstanding voting securities of the
Continuing Corporation entitled to vote generally in the election
of Directors, and
<PAGE>
(C) at least a majority of the members of the Board of
Directors of the Continuing Corporation were members of the Board
of Directors of the Corporation at the time of the execution of
the initial agreement providing for such reorganization, merger,
consolidation or transfer of assets;
(b) any "person" or "group" of persons (as those terms are used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Regulations 13D-G and 14D
thereunder) shall have become the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing 20 percent or more of
the combined voting power of the Corporation's then outstanding voting
securities entitled to vote generally in the election of Directors
(excluding (i) the Corporation, (ii) any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
entity controlled, directly or indirectly, by the Corporation, (iii)
any "person" who, on the date of this Agreement, is the "beneficial
owner", directly or indirectly, of 20 percent or more of the
Corporation's outstanding common stock, and (iv) any "group" of
persons that includes Don R. Taylor); or
(c) during any period of two consecutive years, individuals who
constitute the Board of Directors of the Corporation at the beginning
of such period cease for any reason to constitute at least a majority
thereof, excluding individuals whose election, or nomination for
election by the Corporation's shareholders was approved by a vote of
at least two-thirds of the Directors then still in office who were
Directors at the beginning of such period, unless, for this purpose,
any such new Director's initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 or Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors
of the Corporation.
Section 8. Successive Changes of Control. In the event a Change of
Control of the Corporation occurs but the Executive remains employed by the
Corporation until the expiration of the twenty-four month period following the
occurrence thereof, this Agreement shall nevertheless remain in effect and be
applicable with respect to any subsequent or further Change of Control of the
Corporation that may thereafter occur. In the event a Change of Control of the
Corporation occurs subsequent to the occurrence of a prior Change of Control of
the Corporation as to which the twenty-four month period following same has not
yet expired, this Agreement shall survive and continue in effect and the
twenty-four month period following the subsequent Change of Control of the
Corporation shall become the relevant period for determining the Executive's
entitlement to a Severance Entitlement hereunder. For purposes of determining
whether a subsequent Change of Control of the Corporation has occurred after the
occurrence of a prior Change of Control of the Corporation under clauses (b) or
(c) of Section 7 hereof (i) the increase in ownership percentage of the
Corporation's voting securities held by a "person" or "group" whose ownership of
such voting securities has resulted in a prior Change of Control of the
Corporation shall not constitute an additional or subsequent Change of Control
of the Corporation, (ii) each "group" of "persons" shall be separate and
distinct from any other "group" even though one or more "persons" may be
included in common in more than one "group", and (iii) a determination as to
whether a Change of Control of the Corporation has occurred under clause (c) of
Section 7 shall be made each time the composition of the Board of Directors of
the Corporation changes based on the then applicable two year "look back"
period.
Section 9. Disqualifying Termination. For purposes of this Agreement, a
"Disqualifying Termination" of the Executive's employment with the Corporation
shall mean a termination of the Executive's employment under any of the
following circumstances:
(a) termination of the Executive's employment by the Corporation
for Cause (as defined in Section 10); or
(b) termination of the Executive's employment by the Corporation
for Disability (as defined in Section 11); or
(c) termination of the Executive's employment by the Executive
without Good Reason (as defined in Section 12) to do so; or
(d) termination of the Executive's employment as a result of the
death of the Executive.
<PAGE>
(As provided in Section 3, the Executive shall not be entitled to a Severance
Entitlement under this Agreement if the Executive's employment with the
Corporation was terminated under circumstances constituting a Disqualifying
Termination.)
Section 10. Termination by the Corporation for Cause. For purposes of
this Agreement, the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for "Cause" only if the Corporation
terminated the Executive's employment with the Corporation for any of the
following reasons:
(a) the continued failure of the Executive to substantially
perform any of the Executive's significant duties or responsibilities
in connection with the Executive's employment (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness) if such failure is not corrected or cured within 30
days after demand for substantial performance is made in writing upon
the Executive by the Corporation specifically identifying the manner in
which the Corporation believes the Executive has failed to
substantially perform one or more of the Executive's significant duties
or responsibilities (repetition of the same failure as previously
described in any such written demand after the 30-day cure period
following such written demand shall be deemed to be "continued failure"
to substantially perform by the Executive); or
(b) any act that constitutes on the part of the Executive
common law fraud or dishonesty regardless of whether such fraud or
dishonesty resulted in, or was intended to result in, a benefit to the
Executive at the expense of the Corporation; or
(c) the conviction of the Executive of, or the plea by the
Executive of nolo contendere to, a felony or a crime involving moral
turpitude; or
(d) any continuing violation by the Executive in any material
respect of any of the Corporation's policies or of any term or
provision of any employment or other agreement between the Executive
and the Corporation which, in any such case, is not corrected or abated
by the Executive within 30 days after written notice of such violation
is given by the Corporation to the Executive (repetition of the same
violation as previously described in any such written notice after the
30 day correction period following such written notice shall be deemed
to be a "continuing violation" by the Executive); or
(e) the Executive's unexcused total abandonment or neglect of
the Executive's duties and responsibilities in connection with the
Executive's employment with the Corporation (other than absences due to
illness, physical or mental incapacity, vacations, or other excused
absences) for a continuous period of ten working days.
Section 11. Termination by the Corporation for Disability. For purposes
of this Agreement, the Executive shall be considered to have suffered a
"Disability" and the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for Disability if such termination
is made after (and is identified by the Corporation as being on account of the
occurrence of) either of the following:
(a) the actual receipt by the Executive of income continuation
benefits or similar benefits pursuant to a disability insurance policy
as a result of a determination under such policy that the Executive is
disabled, or
(b) the Executive's inability by reason of physical and/or
mental incapacity to substantially perform the essential functions of
the Executive's duties and responsibilities to the Corporation on a
full-time basis for a period of 26 consecutive weeks.
Section 12. Termination by the Executive for Good Reason.
(a) For purposes of this Agreement, and subject to the time
limitations and in compliance with the requirements of subsection (b)
of this Section, the Executive shall have "Good Reason" to terminate
the Executive's employment with the Corporation upon the occurrence
during the Termination Period, without the Executive's express written
consent or agreement thereto, of any of the following:
<PAGE>
(i) the Executive is demoted to a materially lesser
position within the Corporation (considering, in making a
determination as to whether a demotion has occurred, the
Executive's status, offices, titles, reporting requirements,
authority, duties, responsibilities and other relevant
factors) or the taking by the Corporation of any other action
that a reasonable person in the Executive's position would
conclude is inconsistent in any material and adverse respect
with the Executive's position within the Corporation;
(ii) the Executive's base salary is reduced or the
Executive is denied a fringe benefit provided to the
Corporation's management employees generally;
(iii) the Executive is required by the Corporation to
be based at any office or location outside of either Johnson
County or Marion County, Indiana, or any county contiguous to
Marion County, Indiana; or
(iv) the Corporation fails to comply with and satisfy
Section 17.
(b) Upon the occurrence during the Termination Period of any
facts or circumstances that constitute Good Reason for the Executive to
terminate his employment with the Corporation as described in
subsection (a) of this Section, the Executive shall, within sixty (60)
days after the occurrence thereof, give written notice to the
Corporation of the facts or circumstances that constitute Good Reason,
describing in such written notice the facts or circumstances in
question with reasonable particularity. The Corporation shall have a
period of thirty (30) days after receipt of such written notice from
the Executive in which to take such actions, if any, as the Corporation
shall deem necessary, appropriate or desirable, in its judgment, to
remedy, eliminate or otherwise "cure" the facts or circumstances in
question in such a manner that Good Reason no longer exists by virtue
thereof. In the event the Corporation shall fail to remedy, eliminate
or cure such facts or circumstances in such a manner that Good Reason
no longer exists by virtue thereof within such thirty (30) day period,
then after the expiration of such thirty (30) day period the Executive
may terminate his employment with the Corporation for Good Reason (if
Good Reason does, in fact, exist) by written notice of such termination
to the Corporation; provided, however, that any such termination must
be effected by the Executive on or before the earlier of (i) the date
that is sixty (60) days after the date the Corporation receives the
written notice required hereunder from the Executive, or (b) the
expiration of the Termination Period.
Section 13. No Mitigation. The Executive is not required to mitigate
the amount of the Severance Entitlement to be provided by the Corporation
pursuant to this Agreement by seeking other employment or otherwise, nor shall
the amount of the Severance Entitlement payable pursuant to this Agreement be
reduced by any compensation earned by the Executive as the result of employment
by another employer, or which might have been earned by the Executive had the
Executive sought other employment, after the date of termination of the
Executive's employment with the Corporation.
<PAGE>
Section 14. Notices. Any notice, request, demand and other
communication to be given hereunder shall be in writing and personally delivered
or mailed in the continental United States by registered or certified mail,
postage prepaid, at the address stated below or to such changed address as the
addressee may have given by a similar notice:
To the Company: Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
To the Executive: Gary F. Hentschel
5760 Ravine Road
Indianapolis, Indiana 46220
Section 15. Legal Expenses. In the event that either of the parties
institutes any legal action to enforce its rights under, or to recover damages
for breach of, this Agreement, the prevailing party shall be entitled to recover
from the other party any actual expenses for attorney's fees, costs, expenses
and disbursements incurred by the prevailing party.
Section 16. Successors to the Executive. This Agreement shall be
binding upon and shall inure to the benefit of the Executive, the Executive's
heirs, beneficiaries, devisees, successors and legal representatives. No right
or interest to or in any payments hereunder shall be assignable by the Executive
except assignments to the Corporation in accordance with applicable law;
provided, however, that this provision shall not preclude the Executive from
designating one or more beneficiaries to receive any amount that may be payable
after the Executive's death and shall not preclude the legal representative of
the Executive's estate from assigning any right hereunder to the person or
persons entitled thereto under the Executive's will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of intestacy
applicable to the Executive's estate. The term "beneficiaries" as used in this
Agreement shall mean a beneficiary or beneficiaries so designated to receive any
such amount, or, if no beneficiary has been so designated, the legal
representative of the Executive's estate. In the event of the Executive's death,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to the Executive's legal representative or, where appropriate, to the
Executive's beneficiary or beneficiaries.
Section 17. Successors to the Corporation. This Agreement shall be
binding upon and inure to the benefit of the Corporation and any successor of
the Corporation, including, without limitation, any successor acquiring directly
or indirectly all or substantially all of the business and/or assets of the
Corporation whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed the "Corporation" for the purposes of this
Agreement). The Corporation shall require and shall cause any such successor of
the Corporation to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place.
<PAGE>
Section 18. Headings; Pronouns. The titles to sections in this Agreement
are intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section. All pronouns in this
Agreement and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
may require.
Section 19. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Indiana.
Section 20. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment, modification
or waiver shall be authorized by the Board of Directors of the Corporation or
any authorized committee of the Board of Directors of the Corporation and shall
be agreed to in writing, signed by the Executive and by an officer of the
Corporation thereunto duly authorized. Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a subsequent breach of such
condition or provision or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.
Section 21. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect to the fullest extent permitted by law.
Section 22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute the same instrument.
Section 23. PMI Companies. Although the Corporation is the only one of the
PMI Companies formally executing this Agreement, the Executive understands,
acknowledges and agrees that this Agreement is made for the benefit of all of
the PMI Companies, as applicable, each of whom shall be entitled to enforce this
Agreement as their respective interests may appear.
<PAGE>
IN WITNESS WHEREOF, the Corporation and the Executive have executed
this Agreement as of the date and year first above written.
PERSONNEL MANAGEMENT, INC.
By /s/ Don R. Taylor
Don R. Taylor
Chief Executive Officer
ATTEST:
/s/ Robert R. Millard
Robert R. Millard
Secretary
"EXECUTIVE"
/s/ Gary F. Hentschel
Gary F. Hentschel
EXHIBIT 10.5
AMENDED CHANGE OF CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS AMENDED CHANGE OF CONTROL SEVERANCE BENEFITS AGREEMENT (this
"Agreement") is made and entered into as of the 18th day of December, 1997, by
and between PERSONNEL MANAGEMENT, INC., an Indiana corporation (the
"Corporation"), and ROBERT R. MILLARD (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Corporation have previously executed a
Change of Control Severance Benefits Agreement dated February 5, 1996 (the
"Original Agreement"); and
WHEREAS, the Executive and the Corporation mutually desire to replace the
Original Agreement with this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
promises contained herein and other valuable consideration, including services
to be performed by the Executive, it is hereby agreed by and between the parties
as follows:
Section 1. Effect; Effective Date. This Agreement supersedes and
replaces the Original Agreement effective as of the date hereof. Anything in
this Agreement to the contrary notwithstanding, neither this Agreement nor any
provision hereof shall be operative unless and until there has been a Change of
Control of the Corporation (as "Change of Control of the Corporation" is defined
in Section 7 of this Agreement). Upon a Change of Control of the Corporation
this Agreement shall become operative immediately.
Section 2. Employment. This Agreement shall not be construed as
creating a contract of employment between the Executive and the Corporation. The
Executive is, however, employed by the Corporation at the time this Agreement is
executed.
Section 3. Obligation to Provide Severance Entitlement. If the
Executive's employment with the Corporation is terminated under any
circumstances other than a Disqualifying Termination (as defined in Section 9 of
this Agreement) and if such termination of employment occurs concurrently with
or within three months immediately preceding or twenty-four months immediately
following a Change of Control of the Corporation (the "Termination Period"),
then the Corporation shall provide to the Executive a severance benefit in the
manner and amount as provided in Section 4 of this Agreement (the "Severance
Entitlement").
Section 4. Manner and Amount of Severance Entitlement. If the
Corporation is obligated to provide a Severance Entitlement to the Executive
pursuant to Section 3 of this Agreement, the manner in which the Corporation
shall provide such Severance Entitlement and the amount thereof shall be as
follows:
<PAGE>
(a) The Corporation shall cancel all indebtedness of the
Executive to the Corporation (if any) up to, but not in excess of, the
amount of the Severance Entitlement (as provided in Section 4(c)
below).
(b) If the amount of indebtedness of the Executive to the
Corporation cancelled pursuant to Section 4(a) above is less than the
amount of the Severance Entitlement to be provided to the Executive by
the Corporation, the Corporation shall pay to the Executive, by check,
an amount of money equal to the difference between the amount of the
Executive's indebtedness that is cancelled and the amount of the
Severance Entitlement to be provided to the Executive.
(c) The Severance Entitlement to be provided by the
Corporation to the Executive shall consist of the cancellation of
indebtedness and/or the payment of money as provided in Sections 4(a)
and 4(b) above. The aggregate dollar amount of the Severance
Entitlement, whether in debt cancellation or money or both, shall be
equal to three times the greater of (i) the current (as of the time
Executive becomes entitled to the Severance Entitlement) amount of base
salary being paid by the Corporation to the Executive on an annualized
basis, or (ii) the highest amount of base salary paid by the
Corporation to the Executive for any full calendar year during which
the Executive was employed by the Corporation; provided, however, that
if such Severance Entitlement, either alone or together with other
payments which the Executive has the right to receive from any PMI
Company, would constitute an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), then the Corporation shall pay an additional
amount of money to the Executive that will equal (based upon the
Executive's good faith representations of the Executive's income tax
position for the year(s) of payment(s)) the sum of (i) all excise tax
imposed upon the Executive by Section 4999 of the Code and (ii) all
additional state and federal income taxes attributable to the
additional payments to the Executive pursuant to this proviso clause
(including all state and federal taxes on the additional income tax
payments). The determination of the amounts of such payments pursuant
to the immediately preceding proviso shall be made by the Corporation
in good faith, and such determination shall be conclusive and binding.
Section 5. Provision of Severance Entitlement. With respect to a
Severance Entitlement to be provided to the Executive hereunder,the Corporation
shall provide to the Executive satisfactory written evidence of the amount of
any debt cancellation, and/or shall pay to the Executive any money, to which the
Executive is entitled as a Severance Entitlement not later than 30 days after
the later of (i) the occurrence of the Change of Control of the Corporation or
(ii) the termination of the Executive's employment.
Section 6. Withholding. The Corporation may withhold or otherwise
deduct from any Severance Entitlement to be provided hereunder all federal,
state, city, county or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
<PAGE>
Section 7. Change of Control of the Corporation. For purposes of this
Agreement, a "Change of Control of the Corporation" shall be deemed to have
occurred if, after the date hereof either:
(a) there shall have been consummated (i) any
reorganization, consolidation or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation or pursuant
to which shares of the Corporation's common stock shall have been
converted into cash, securities or other property, or (ii) any sale,
lease, exchange or other transfer, directly or indirectly, (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation and its
consolidated subsidiaries unless, following such reorganization,
merger, consolidation, or transfer of assets,
(A) more than 60 percent of the then outstanding shares of
common stock of the corporation resulting from such
reorganization, merger or consolidation (or of the corporation
receiving the transferred assets) (the "Continuing Corporation")
and of the then outstanding voting securities of the Continuing
Corporation entitled to vote generally in the election of
Directors are then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the outstanding shares of
common stock of the Corporation and of the outstanding voting
securities of the Corporation entitled to vote generally in the
election of Directors immediately prior to such reorganization,
merger, consolidation or transfer of assets in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or transfer of assets, of
the outstanding shares of common stock of the Corporation and of
the outstanding voting securities of the Corporation,
(B) no "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
(excluding (aa) the Corporation, (bb) any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or
any entity controlled, directly or indirectly, by the Corporation
or the Continuing Corporation and (cc) any "person" beneficially
owning, immediately prior to such reorganization, merger,
consolidation or transfer of assets, directly or indirectly, 20
percent or more of the outstanding shares of common stock of the
Corporation or the outstanding voting securities of the
Corporation) beneficially owns, directly or indirectly, 20
percent or more of, respectively, the then outstanding shares of
common stock of the Continuing Corporation or of the combined
voting power of the then outstanding voting securities of the
Continuing Corporation entitled to vote generally in the election
of Directors, and
<PAGE>
(C) at least a majority of the members of the Board of
Directors of the Continuing Corporation were members of the Board
of Directors of the Corporation at the time of the execution of
the initial agreement providing for such reorganization, merger,
consolidation or transfer of assets;
(b) any "person" or "group" of persons (as those terms are used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Regulations 13D-G and 14D
thereunder) shall have become the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing 20 percent or more of
the combined voting power of the Corporation's then outstanding voting
securities entitled to vote generally in the election of Directors
(excluding (i) the Corporation, (ii) any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
entity controlled, directly or indirectly, by the Corporation, (iii)
any "person" who, on the date of this Agreement, is the "beneficial
owner", directly or indirectly, of 20 percent or more of the
Corporation's outstanding common stock, and (iv) any "group" of
persons that includes Don R. Taylor); or
(c) during any period of two consecutive years, individuals who
constitute the Board of Directors of the Corporation at the beginning
of such period cease for any reason to constitute at least a majority
thereof, excluding individuals whose election, or nomination for
election by the Corporation's shareholders was approved by a vote of
at least two-thirds of the Directors then still in office who were
Directors at the beginning of such period, unless, for this purpose,
any such new Director's initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 or Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors
of the Corporation.
Section 8. Successive Changes of Control. In the event a Change of
Control of the Corporation occurs but the Executive remains employed by the
Corporation until the expiration of the twenty-four month period following the
occurrence thereof, this Agreement shall nevertheless remain in effect and be
applicable with respect to any subsequent or further Change of Control of the
Corporation that may thereafter occur. In the event a Change of Control of the
Corporation occurs subsequent to the occurrence of a prior Change of Control of
the Corporation as to which the twenty-four month period following same has not
yet expired, this Agreement shall survive and continue in effect and the
twenty-four month period following the subsequent Change of Control of the
Corporation shall become the relevant period for determining the Executive's
entitlement to a Severance Entitlement hereunder. For purposes of determining
whether a subsequent Change of Control of the Corporation has occurred after the
occurrence of a prior Change of Control of the Corporation under clauses (b) or
(c) of Section 7 hereof (i) the increase in ownership percentage of the
Corporation's voting securities held by a "person" or "group" whose ownership of
such voting securities has resulted in a prior Change of Control of the
Corporation shall not constitute an additional or subsequent Change of Control
of the Corporation, (ii) each "group" of "persons" shall be separate and
distinct from any other "group" even though one or more "persons" may be
included in common in more than one "group", and (iii) a determination as to
whether a Change of Control of the Corporation has occurred under clause (c) of
Section 7 shall be made each time the composition of the Board of Directors of
the Corporation changes based on the then applicable two year "look back"
period.
<PAGE>
Section 9. Disqualifying Termination. For purposes of this Agreement, a
"Disqualifying Termination" of the Executive's employment with the Corporation
shall mean a termination of the Executive's employment under any of the
following circumstances:
(a) termination of the Executive's employment by the Corporation
for Cause (as defined in Section 10); or
(b) termination of the Executive's employment by the Corporation
for Disability (as defined in Section 11); or
(c) termination of the Executive's employment by the Executive
without Good Reason (as defined in Section 12) to do so; or
(d) termination of the Executive's employment as a result of the
death of the Executive.
(As provided in Section 3, the Executive shall not be entitled to a Severance
Entitlement under this Agreement if the Executive's employment with the
Corporation was terminated under circumstances constituting a Disqualifying
Termination.)
Section 10. Termination by the Corporation for Cause. For purposes of
this Agreement, the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for "Cause" only if the Corporation
terminated the Executive's employment with the Corporation for any of the
following reasons:
(a) the continued failure of the Executive to substantially
perform any of the Executive's significant duties or responsibilities
in connection with the Executive's employment (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness) if such failure is not corrected or cured within 30
days after demand for substantial performance is made in writing upon
the Executive by the Corporation specifically identifying the manner in
which the Corporation believes the Executive has failed to
substantially perform one or more of the Executive's significant duties
or responsibilities (repetition of the same failure as previously
described in any such written demand after the 30-day cure period
following such written demand shall be deemed to be "continued failure"
to substantially perform by the Executive); or
<PAGE>
(b) any act that constitutes on the part of the Executive
common law fraud or dishonesty regardless of whether such fraud or
dishonesty resulted in, or was intended to result in, a benefit to the
Executive at the expense of the Corporation; or
(c) the conviction of the Executive of, or the plea by the
Executive of nolo contendere to, a felony or a crime involving moral
turpitude; or
(d) any continuing violation by the Executive in any material
respect of any of the Corporation's policies or of any term or
provision of any employment or other agreement between the Executive
and the Corporation which, in any such case, is not corrected or abated
by the Executive within 30 days after written notice of such violation
is given by the Corporation to the Executive (repetition of the same
violation as previously described in any such written notice after the
30 day correction period following such written notice shall be deemed
to be a "continuing violation" by the Executive); or
(e) the Executive's unexcused total abandonment or neglect of
the Executive's duties and responsibilities in connection with the
Executive's employment with the Corporation (other than absences due to
illness, physical or mental incapacity, vacations, or other excused
absences) for a continuous period of ten working days.
Section 11. Termination by the Corporation for Disability. For purposes
of this Agreement, the Executive shall be considered to have suffered a
"Disability" and the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for Disability if such termination
is made after (and is identified by the Corporation as being on account of the
occurrence of) either of the following:
(a) the actual receipt by the Executive of income continuation
benefits or similar benefits pursuant to a disability insurance policy
as a result of a determination under such policy that the Executive is
disabled, or
(b) the Executive's inability by reason of physical and/or
mental incapacity to substantially perform the essential functions of
the Executive's duties and responsibilities to the Corporation on a
full-time basis for a period of 26 consecutive weeks.
Section 12. Termination by the Executive for Good Reason.
(a) For purposes of this Agreement, and subject to the time
limitations and in compliance with the requirements of subsection (b)
of this Section, the Executive shall have "Good Reason" to terminate
the Executive's employment with the Corporation upon the occurrence
during the Termination Period, without the Executive's express written
consent or agreement thereto, of any of the following:
<PAGE>
(i) the Executive is demoted to a materially lesser
position within the Corporation (considering, in making a
determination as to whether a demotion has occurred, the
Executive's status, offices, titles, reporting requirements,
authority, duties, responsibilities and other relevant
factors) or the taking by the Corporation of any other action
that a reasonable person in the Executive's position would
conclude is inconsistent in any material and adverse respect
with the Executive's position within the Corporation;
(ii) the Executive's base salary is reduced or the
Executive is denied a fringe benefit provided to the
Corporation's management employees generally;
(iii) the Executive is required by the Corporation to
be based at any office or location outside of either Johnson
County or Marion County, Indiana, or any county contiguous to
Marion County, Indiana; or
(iv) the Corporation fails to comply with and satisfy
Section 17.
(b) Upon the occurrence during the Termination Period of any
facts or circumstances that constitute Good Reason for the Executive to
terminate his employment with the Corporation as described in
subsection (a) of this Section, the Executive shall, within sixty (60)
days after the occurrence thereof, give written notice to the
Corporation of the facts or circumstances that constitute Good Reason,
describing in such written notice the facts or circumstances in
question with reasonable particularity. The Corporation shall have a
period of thirty (30) days after receipt of such written notice from
the Executive in which to take such actions, if any, as the Corporation
shall deem necessary, appropriate or desirable, in its judgment, to
remedy, eliminate or otherwise "cure" the facts or circumstances in
question in such a manner that Good Reason no longer exists by virtue
thereof. In the event the Corporation shall fail to remedy, eliminate
or cure such facts or circumstances in such a manner that Good Reason
no longer exists by virtue thereof within such thirty (30) day period,
then after the expiration of such thirty (30) day period the Executive
may terminate his employment with the Corporation for Good Reason (if
Good Reason does, in fact, exist) by written notice of such termination
to the Corporation; provided, however, that any such termination must
be effected by the Executive on or before the earlier of (i) the date
that is sixty (60) days after the date the Corporation receives the
written notice required hereunder from the Executive, or (b) the
expiration of the Termination Period.
Section 13. No Mitigation. The Executive is not required to mitigate
the amount of the Severance Entitlement to be provided by the Corporation
pursuant to this Agreement by seeking other employment or otherwise, nor shall
the amount of the Severance Entitlement payable pursuant to this Agreement be
reduced by any compensation earned by the Executive as the result of employment
by another employer, or which might have been earned by the Executive had the
Executive sought other employment, after the date of termination of the
Executive's employment with the Corporation.
<PAGE>
Section 14. Notices. Any notice, request, demand and other
communication to be given hereunder shall be in writing and personally delivered
or mailed in the continental United States by registered or certified mail,
postage prepaid, at the address stated below or to such changed address as the
addressee may have given by a similar notice:
To the Company: Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
To the Executive: Robert R. Millard
8125 Springwater Drive West
Indianapolis, Indiana 46256
Section 15. Legal Expenses. In the event that either of the parties
institutes any legal action to enforce its rights under, or to recover damages
for breach of, this Agreement, the prevailing party shall be entitled to recover
from the other party any actual expenses for attorney's fees, costs, expenses
and disbursements incurred by the prevailing party.
Section 16. Successors to the Executive. This Agreement shall be
binding upon and shall inure to the benefit of the Executive, the Executive's
heirs, beneficiaries, devisees, successors and legal representatives. No right
or interest to or in any payments hereunder shall be assignable by the Executive
except assignments to the Corporation in accordance with applicable law;
provided, however, that this provision shall not preclude the Executive from
designating one or more beneficiaries to receive any amount that may be payable
after the Executive's death and shall not preclude the legal representative of
the Executive's estate from assigning any right hereunder to the person or
persons entitled thereto under the Executive's will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of intestacy
applicable to the Executive's estate. The term "beneficiaries" as used in this
Agreement shall mean a beneficiary or beneficiaries so designated to receive any
such amount, or, if no beneficiary has been so designated, the legal
representative of the Executive's estate. In the event of the Executive's death,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to the Executive's legal representative or, where appropriate, to the
Executive's beneficiary or beneficiaries.
Section 17. Successors to the Corporation. This Agreement shall be
binding upon and inure to the benefit of the Corporation and any successor of
the Corporation, including, without limitation, any successor acquiring directly
or indirectly all or substantially all of the business and/or assets of the
Corporation whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed the "Corporation" for the purposes of this
Agreement). The Corporation shall require and shall cause any such successor of
the Corporation to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place.
<PAGE>
Section 18. Headings; Pronouns. The titles to sections in this Agreement
are intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section. All pronouns in this
Agreement and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
may require.
Section 19. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Indiana.
Section 20. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment, modification
or waiver shall be authorized by the Board of Directors of the Corporation or
any authorized committee of the Board of Directors of the Corporation and shall
be agreed to in writing, signed by the Executive and by an officer of the
Corporation thereunto duly authorized. Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a subsequent breach of such
condition or provision or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.
Section 21. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect to the fullest extent permitted by law.
Section 22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute the same instrument.
Section 23. PMI Companies. Although the Corporation is the only one of the
PMI Companies formally executing this Agreement, the Executive understands,
acknowledges and agrees that this Agreement is made for the benefit of all of
the PMI Companies, as applicable, each of whom shall be entitled to enforce this
Agreement as their respective interests may appear.
<PAGE>
IN WITNESS WHEREOF, the Corporation and the Executive have executed
this Agreement as of the date and year first above written.
PERSONNEL MANAGEMENT, INC.
By /s/ Don R. Taylor
Don R. Taylor
Chief Executive Officer
ATTEST:
/s/ Gary F. Hentschel
Gary F. Hentschel
President
"EXECUTIVE"
/s/ Robert R. Millard
Robert R. Millard
EXHIBIT 10.6
PERSONNEL MANAGEMENT, INC.
1998 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
This Stock Option Plan ("Plan") is designed to provide an incentive to
persons employed by Personnel Management, Inc. (the "Corporation") and any of
its subsidiaries, including officers and employee Directors, and to offer an
additional inducement in obtaining the services of key personnel and
professional advisors by granting such persons options to purchase shares of the
Corporation's common stock ("Common Shares"). The Plan provides for the grant of
(i) options intended to qualify as "Incentive Stock Options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) non-qualified options.
2. STOCK SUBJECT TO THE PLAN
The Common Shares to be issued upon exercise of options granted under
the Plan (the "Options") shall be made available, at the discretion of a
committee of the Board of Directors appointed hereunder, from either authorized
but unissued Common Shares or Common Shares held in the treasury of the
Corporation or any subsidiary of the Corporation, including Common Shares
purchased in the open market or otherwise.
Subject to the provisions of the next succeeding paragraph of this
Section 2, the aggregate number of shares for which Options may be granted under
the Plan shall be 200,000. If, prior to December 17, 2007, the Plan remains in
effect and an Option granted under the Plan shall have terminated for any reason
without having been exercised in full, then the unpurchased shares covered by
the terminated Option shall become available for option to other employees.
In the event that an optionee tenders Common Shares owned by the
optionee in payment of the purchase price of shares the optionee has elected to
purchase pursuant to an Option, only the net shares issued in connection with
such transaction (calculated by subtracting the number of shares tendered in
payment from the number of shares purchased under the Option) shall be
considered to be shares for which Options have been granted under the Plan, and
the remaining number of shares issued under such Option shall be considered
unpurchased shares that shall again become available for grants of Options to
other employees.
In the event that the outstanding Common Shares hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Corporation by reason of any recapitalization, reclassification,
combination of shares, stock split-up, stock dividend, or other reorganization
or (in the discretion of the Committee) in the event of any spin-off or other
distribution of a substantial portion of the assets of the Corporation to the
holders of the shares of the Corporation then subject to Options granted
hereunder:
<PAGE>
(a) the aggregate number and kind of shares subject to Options which
may be granted hereunder shall be adjusted appropriately; and
(b) rights under outstanding Options granted hereunder, both as to the
number of subject shares and the Option price, shall be adjusted
appropriately.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Committee, and any such
adjustment may provide for the elimination of fractional share interests.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee of the Board of Directors
(the "Committee") consisting of two or more members, each of whom shall qualify
at all times as a "Non-Employee Director" within the meaning of Rule 16b-3
adopted under the Securities Exchange Act of 1934, as amended, or any successor
rule ("Rule 16b-3"). The members of the Committee shall be appointed by, and may
be changed from time to time in the discretion of, the Board of Directors of the
Corporation. A majority of the members shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, and any acts approved in writing by all of the members without a
meeting, shall be the acts of the Committee.
4. OPTION PRICE
The purchase price under each Option shall be determined by the
Committee at the time of grant. In the case of Incentive Stock Options, the
purchase price must be set as follows:
(a) for persons who at the time of grant own stock possessing ten
percent or less of the total combined voting power of all classes of stock
of the Corporation or any parent or subsidiary corporation, the Option
price at the time the Option is granted must be set at no less than the
fair market value of the Common Shares subject to the Option; and
(b) for optionees who own stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Corporation
or of any parent or subsidiary corporation, the Option price at the time
the Option is granted must be at least 110 percent of the fair market value
of the Common Shares subject to the Option.
The purchase price for nonqualified Options shall be set at the fair market
value of the Common Shares covered by the Option at the time of grant. Fair
market value shall be determined for purposes of Section 4 by the Committee in
good faith in accordance with all applicable requirements of the Code.
5. OPTIONS AND ELIGIBILITY OF OPTIONEES
The Committee may, consistent with the purposes of the Plan, from time
to time (a) grant Options to any or all employees (including officers and
employee Directors) of the Corporation and any of its future subsidiaries as
defined in applicable sections of the Code, and (b) grant nonqualified Options
to persons who act as consultants (not including non-employee Directors) to the
Corporation but who are not employed by the Corporation. There shall be no
limitation on the aggregate number of shares for which an Option or Options may
be granted to any one individual; provided, however, that the aggregate fair
market value (determined at the time the Option is granted) of the shares with
respect to which Incentive Stock Options are exercisable for the first time
during any calendar year (under all such plans of the Corporation and any parent
or subsidiary corporation) shall not exceed $100,000 (the "Qualifying Limit").
Incentive Stock Options may not be granted under the Plan after December 17,
2007. Notwithstanding the above and in order that the Corporation retains the
flexibility to provide additional inducement to key personnel, the aggregate
fair market value of shares of which any individual may be granted Options that
first become exercisable in any calendar year may exceed the Qualifying Limit;
provided, however, that the Options granted in excess of the Qualifying Limit
shall not be treated as "Incentive Stock Options." Employees may receive more
than one Option under the Plan.
<PAGE>
The Committee, at the time of each grant under this Plan, shall specify
whether such grant is intended to qualify as an Incentive Stock Option or
constitute a non-qualified Option.
The Board of Directors, without further approval of the shareholders,
may substitute new Options for prior options of a constituent corporation or
assume the prior options of a constituent corporation. For the purposes of this
Section 5, a constituent corporation shall include any corporation which has
been merged into or consolidated with the Corporation or one or more
subsidiaries of the Corporation, or whose assets or stock has been acquired by
or liquidated into the Corporation, or by or into any one or more subsidiaries
of the Corporation, or any parent or any subsidiary of such corporation.
Subject to the terms, provisions and conditions of the Plan, the
Committee shall have exclusive jurisdiction (i) to select the persons to whom
Options may be granted, (ii) to determine the number of shares subject to each
Option, (iii) to determine the time or times when Options will be granted, (iv)
to determine the Option price of the shares subject to each Option, which price
in the case of Incentive Stock Options shall be not less than the minimum
specified in Section 4 of the Plan, (v) to determine the time when each option
may be exercised within the limits stated in the Plan, (vi) to prescribe the
form, which shall be consistent with the Plan, of the instruments evidencing any
Options granted under the Plan, and (vi) to take any other action or make any
other determination under this Plan not expressly delegated to others by the
Articles of Incorporation or Bylaws of the Corporation, or by this Plan, or by
applicable law. The Committee's determination or interpretation of any matter
within the Committee's jurisdiction under the Plan shall be conclusive, final
and binding upon the Corporation, the optionees and all other interested
persons.
6. RESTRICTIONS ON TRANSFERABILITY OF OPTIONS
No Option, including any Replacement Option (as defined in Section 7),
granted under the Plan shall be transferable by the optionee unless the
Committee, in its sole discretion, authorizes such transfer and such transfer is
permitted by, or is not in violation of, the provisions of the Code and Rule
16b-3 (to the extent that such are applicable to the Option). Except as
specifically authorized by the Committee, an Option, including any Replacement
Option, shall be exercisable during the optionee's lifetime only by the optionee
or, in the case of the optionee's legal disability, by the optionee's guardian
or legal representative.
<PAGE>
7. EXERCISE OF OPTIONS; REPLACEMENT OPTIONS
Each Option granted under the Plan shall expire not later than ten
years from the date the Option was granted. The Committee may, in its
discretion, prescribe a shorter period for the expiration of any Option or
Options.
Subject to the provisions of this Section 7 and of Section 8 hereof,
each Option may be exercised in whole or from time to time in part with respect
to the number of shares as to which it is then exercisable in accordance with
the terms of the Plan and the determinations of the Committee. Except as
otherwise provided in Section 8 hereof, no Option that is intended to qualify as
an Incentive Stock Option may be exercised unless the optionee shall have been
in the employ of the Corporation or one of its subsidiaries at all times during
the period beginning with the date of grant of such Option and ending on the
date three (3) months prior to the date of exercise of such Option. The
Committee may impose additional conditions upon the right of an optionee to
exercise any Option granted hereunder that are not inconsistent with the terms
of the Plan or, in the case of an Option intended to qualify as an Incentive
Stock Option, with the requirements for qualification as an Incentive Stock
Option under Section 422 of the Code.
A person exercising an Option shall give written notice to the
Corporation of such exercise and the number of shares the optionee has elected
to purchase and shall at the time of purchase tender an amount in cash, in
Common Shares of the Corporation owned by such person, or in any combination of
cash and such Common Shares, equal in value to the purchase price of the shares
the optionee has elected to purchase. Until the purchaser has made such payment
and has been issued a certificate or certificates for the shares so purchased,
the optionee shall possess no shareholder rights with respect to any such share
or shares.
In the event that an optionee tenders Common Shares owned by such
optionee in payment (in whole or in part) of the purchase price of shares that
the optionee has elected to purchase under an Option, the Corporation shall be
obligated to use its best efforts to issue to such optionee a replacement option
of the same type (Incentive Stock Option or nonqualified Option) (a "Replacement
Option") as the Option exercised (the "Exercised Option") and with the same
expiration date as the Exercised Option. Such Replacement Option shall entitle
the optionee to purchase a number of shares equal to the number of shares
tendered to the Corporation to purchase shares under the Exercised Option, and
shall specify an exercise price equal to the fair market value of the Common
Shares on the date of exercise of the Exercised Option. Such Replacement Option
shall not be exercisable during the twelve-month period following the date of
exercise of the Exercised Option; if, during such period, the optionee should
sell any Common Shares of the Corporation (other than in payment of the exercise
price of another Option under the Plan, or pursuant to a corporate transaction
in which all holders of Common Shares are obligated to sell or otherwise dispose
of their shares), then the Replacement Option shall never become exercisable
with respect to the number of shares that are equal to the aggregate number of
Common Shares that were sold by the optionee during such period (subject to
appropriate adjustment for any subsequent changes in the Common Shares of the
type described by Section 2 of this Plan) but shall become exercisable as to the
remainder of the Common Shares covered by the Replacement Option. Except as
specifically provided otherwise in this Section 7, all provisions of this Plan
applicable to an Option shall apply to a Replacement Option of the same type
(Incentive Stock Option or nonqualified Option). Replacement Options shall be
issuable upon exercise of other Replacement Options granted under this paragraph
if all conditions for such issuance are satisfied.
<PAGE>
8. TERMINATION OF EMPLOYMENT
(a) Termination Other Than for Disability, Retirement or Upon
Death. In the event that any optionee's employment by the Corporation
and its subsidiaries shall terminate for any reason, other than
permanent and total disability as such term is defined in Section
22(e)(3) of the Code ("Permanent and Total Disability"), retirement or
death, all of such optionee's Options (regardless of whether they are
intended to be Incentive Stock Options), and all of such optionee's
rights to purchase or receive Common Shares pursuant thereto, as the
case may be, may be exercised, to the extent that the Optionee was
entitled to exercise such Options at the date of such termination of
employment, by the optionee until the earlier of (i) the respective
expiration dates of such Options or (ii) (x) if the Option is an
Incentive Stock Option, on the date that is three (3) months after the
date of such termination of employment or (y) if the Option is a
nonqualified Option, on the date that is one (1) year after the date
of such termination of employment. If, however, an optionee's
employment is terminated for cause, the provisions of the preceding
sentence shall not apply and any Option held by such optionee will
terminate automatically upon the termination of the optionee's
employment. Options granted under the Plan shall not be affected by
any change in service or employment so long as the optionee continues
to be employed by or in the service of the Corporation or any of its
subsidiaries, or a corporation (or a parent or subsidiary of such
corporation) issuing or assuming an Option in a transaction in
accordance with applicable Code requirements.
(b) Disability. In the event that any optionee's employment shall
terminate as a result of the Permanent and Total Disability of such
optionee, such optionee (or the optionee's guardian or legal
representative) may exercise, to the extent that the optionee was
entitled to exercise any such Options at the date of such termination
of employment, any Options granted to the optionee pursuant to the
Plan at any time prior to the earlier of (i) the respective expiration
dates of any such Options or (ii) (x) if the Option is an Incentive
Stock Option, on the date that is one year after the date of such
termination of employment or (y) if the Option is a nonqualified
Option, on the date that is three (3) years after the date of such
termination of employment.
(c) Death. In the event that any optionee's employment shall
terminate as a result of the death of the optionee, any Options
granted to any such optionee may be exercised, to the extent that the
optionee was entitled to exercise any such Options at the date of
death, by the person or persons to whom the optionee's rights under
any such Options pass by will or by the laws of descent and
distribution (including the optionee's estate during the period of
administration) at any time prior to the earlier of (i) the respective
expiration dates of any such Options or (ii) the date which is three
(3) years after date of death of such optionee.
<PAGE>
(d) Retirement. In the event that any optionee's employment
terminates as a result of the optionee's retirement on or after
attaining the age of 62 and after the optionee has been employed by
the Corporation for at least three (3) years, such optionee (or the
optionee's guardian or legal representative) may exercise, to the
extent that the optionee was entitled to exercise any such Option at
the date of such termination of employment, any Options granted to the
optionee pursuant to the Plan at any time prior to the earlier of (i)
the respective expiration dates of any such Options or (ii) the date
which is three (3) years after the date of such termination of
employment. In the event that an optionee's employment terminates as a
result of the optionee's retirement and such optionee has not been
employed by the Corporation for at least three (3) years at the time
of such retirement, then, on the date of such optionee's retirement,
all of such optionee's Options and rights to purchase or receive
Common Shares pursuant thereto shall terminate.
(e) Nonqualified Options. Notwithstanding the above provisions of
this Section 8, the Committee in its sole discretion may extend the
termination date of any nonqualified Option to a date not later than
the scheduled expiration date of the nonqualified Option.
(f) Termination of Options. To the extent that any Option granted
under the Plan to any optionee whose employment by the Corporation
terminates shall not have been exercised within the applicable period
set forth in this Section 8, as it may be extended by the Committee
hereunder, any such Option, and all rights to purchase shares pursuant
thereto, shall terminate on the last date of the applicable period.
9. EFFECT OF CORPORATE REORGANIZATIONS
Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation of the Corporation as a result of which
the outstanding securities of the class then subject to Options hereunder are
changed into or exchanged for cash or property or securities not of the
Corporation's issue, or upon a sale of substantially all the property of the
Corporation to another corporation or person, the Plan shall terminate, unless
provision shall be made in writing in connection with such transaction for the
continuance of the Plan and/or for the assumption of Options theretofore
granted, or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event the Plan and Options theretofore granted shall continue in the manner and
under the terms so provided. If the Plan and unexercised Options shall terminate
pursuant to the foregoing sentence, all persons entitled to exercise any
unexercised portions of Options then outstanding shall have the right, at such
time prior to the consummation of the transaction causing such termination as
the Corporation shall designate, to exercise the unexercised portions of their
Options, including the portions thereof which would, but for this Section 9, not
yet be exercisable.
<PAGE>
10. OTHER EMPLOYEE STOCK BENEFIT PLANS
The Corporation reserves the right, in the discretion of its Board of
Directors, to establish other plans during the term of this Plan under which
employees and others providing services to the Corporation and its subsidiaries
(including officers and Directors thereof) may be entitled (in addition to their
rights under Options granted under this Plan) to receive or purchase shares of
the Corporation's capital stock or other securities, or cash amounts determined
in relation to the earnings, dividends, net worth or market appreciation of
shares of the Corporation's capital stock or other securities, including, but
not limited to, restricted stock, stock appreciation rights, stock bonuses, book
value stock, and the like.
11. AMENDMENTS TO PLAN
The Committee may from time to time prescribe, amend and rescind rules
and regulations relating to the Plan and, subject to the approval of the Board
of Directors of the Corporation, may at any time terminate, modify or suspend
the operation of the Plan, provided that no such modification shall be effected
without approval of the shareholders if such modification would cause the Plan
to no longer to comply with any regulatory or legal requirements.
12. MISCELLANEOUS
(a) Compliance with Law.
(i) The Corporation shall not be required to sell or issue any
shares under any Option if the issuance of such shares shall
constitute or result in a violation by the optionee or the Corporation
of any provisions of any law, statute or regulation of any
governmental authority. Without limiting the generality of the
foregoing, in connection with the Securities Act of 1933 (the
"Securities Act"), upon exercise of any Option, the Corporation shall
not be required to issue shares unless the Committee has received
evidence satisfactory to it to the effect that registration under the
Securities Act and applicable state securities laws is not required or
that such registration is effective. Any determination in this
connection by the Committee shall be final, binding and conclusive. If
shares are issued under any Option without registration under the
Securities Act or applicable state securities laws, the Optionee may
be required to accept the shares subject to such restrictions on
transferability as may in the reasonable judgment of the Committee be
required to comply with exemptions from registration under such laws.
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act or
applicable state securities laws. The Corporation shall not be
obligated to take any other affirmative action in order to cause the
exercise of an option or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority.
(ii) With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934 (the "1934 Act"), transactions under
this Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Committee.
<PAGE>
(b) Vesting. The Committee, in its sole discretion, shall determine
the conditions, if any, for the vesting of rights in Options granted
pursuant to the Plan.
(c) Tenure. Nothing in the Plan or in any Option granted hereunder or
in any agreement relating thereto shall confer upon any officer or employee
the right to continue in such position with the Corporation or any
subsidiary thereof.
(d) Withholding Taxes. Where an optionee is entitled to receive shares
pursuant to the exercise of an Option pursuant to the Plan, the Corporation
shall have the right to require the optionee to pay the Corporation the
amount of any taxes which the Corporation is required to withhold with
respect to such shares, or, in lieu thereof, to retain, or sell without
notice, a number of such shares sufficient to cover the amount required to
be withheld.
(e) Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the feminine pronoun shall include
the masculine gender.
(f) Headings, Etc., No Part of the Plan. Headings of sections and
paragraphs hereof are inserted for convenience of reference; they
constitute no part of the Plan.
(g) Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Indiana except to the extent that
Federal law shall be deemed to apply.
13. EFFECTIVE DATE
The Plan shall become effective on the date of adoption by the Board of
Directors (the "Effective Date"), subject to approval by the shareholders of the
Corporation either (a) by the affirmative vote of a majority of the votes cast
at a duly held meeting at which a quorum representing a majority of all
outstanding shares entitled to vote thereon is present in person or by proxy and
voting on the Plan or (b) by unanimous written consent. The Plan shall expire on
December 17, 2007, after which no Options may be granted under the Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FILER'S QUARTERLY REPORT ON FORM 10-Q FOR
THE FISCAL QUARTER ENDED JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 164,985
<SECURITIES> 0
<RECEIVABLES> 7,837,916
<ALLOWANCES> 120,503
<INVENTORY> 0
<CURRENT-ASSETS> 8,796,716
<PP&E> 2,814,243
<DEPRECIATION> 1,523,930
<TOTAL-ASSETS> 18,093,712
<CURRENT-LIABILITIES> 4,547,948
<BONDS> 2,060,986
0
0
<COMMON> 8,151,671
<OTHER-SE> 3,159,907
<TOTAL-LIABILITY-AND-EQUITY> 18,093,712
<SALES> 20,240,898
<TOTAL-REVENUES> 20,240,898
<CGS> 16,335,430
<TOTAL-COSTS> 16,335,430
<OTHER-EXPENSES> 3,281,267
<LOSS-PROVISION> (17,619)
<INTEREST-EXPENSE> 83,274
<INCOME-PRETAX> 398,966
<INCOME-TAX> 173,800
<INCOME-CONTINUING> 225,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225,166
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
