U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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)
Issuer's telephone number: (317) 888-4400
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, no
par value
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE> 2
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 405, 17 CFR 230.405.): $14,089,728 (approx.) valued at the
average of the last sale price of $12.00 per share on January 23, 1998 (assuming
solely for this purpose that all executive officers, directors, and persons
believed to beneficially own 10 percent or more of the Registrant's common stock
were affiliates and that all other shareholders were non-affiliates).
Indicate the number of shares outstanding of each of the registrants classes of
common stock, as of the latest practicable date: 2,032,918 Common Shares as of
January 23, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1997 Annual Report to Shareholders are
incorporated by reference into Part II of this Report, and portions of the
Registrant's Proxy Statement, to be filed pursuant to Regulation 14A within 120
days of the close of the Registrant's fiscal year, are incorporated by reference
into Part III of this Report.
<PAGE> 3
PART I
ITEM 1. BUSINESS.
Overview
Personnel Management, Inc., an Indiana corporation, provides temporary and
long-term staffing services to businesses located throughout most of Indiana,
portions of northern Kentucky, Atlanta, Georgia, and Jacksonville and Tampa,
Florida. The Company's staffing business primarily involves providing temporary
employees to industrial clients, although it also provides clerical, technical
and professional temporary staffing and long-term placement services.
The Company has grown rapidly through the opening of new branch offices and
by acquisitions of other staffing businesses since it commenced operations as a
provider of staffing services in central Indiana in 1986. The Company purchased
staffing businesses operating in southwestern Florida and in northern and
southern Indiana during its fiscal year ended October 31, 1994. During its
fiscal year ended October 31, 1996, the Company acquired a staffing business in
Atlanta, Georgia, and a staffing business in Jacksonville, Florida. The business
operations in Atlanta provide mostly clerical staffing services, while the
business in Jacksonville provides clerical and warehousing staffing services to
its customers.
The Company acquired on March 17, 1997, the assets of Garner-Scott
Enterprise, Inc., a staffing business based in Madison, Indiana and Carrollton,
Kentucky. The acquired business operations provide predominately light
industrial staffing services. On March 24, 1997, the Company acquired the assets
of First In Temporaries, Inc.'s Louisville, Kentucky staffing operations. The
acquired business operations provide clerical and light industrial staffing
services. The Company acquired on April 25, 1997 a minority equity investment in
Adminiserve, Inc., a professional employer organization based in Greenwood,
Indiana. Management intends to pursue a strategy of acquiring other staffing
companies, opening new staffing offices and expanding its services to client
companies.
In June 1994, the Company transferred its existing operations, which were
then principally located in central and southeastern Indiana, to a wholly-owned
subsidiary entity, and the businesses acquired in subsequent acquisition
transactions have similarly been placed in wholly-owned subsidiary entities. The
Company (through an administration subsidiary) provides centralized general
administration and support functions for the operating entities.
<PAGE> 4
The Company's revenues and quarterly results have typically been seasonal
because of the Company's concentration towards staffing the personnel needs of
industrial clients. Industrial production tends to be seasonal due to the
customary reduction in production during the year-end holidays (Thanksgiving
through New Year's Day) and to year-end inventory reduction goals of most
manufacturers. This seasonal downtime in industrial operations reduces the needs
of the Company's industrial clients for temporary personnel during winter
months. As a result, the Company has historically experienced its highest
revenues of each fiscal year during its fourth quarter which ends October 31,
and has experienced its weakest revenues in the first quarter which ends January
31.
The staffing industry has grown rapidly as a result of cyclical economic
trends as well as changing attitudes and approaches to staffing. Demand for
temporary employees has historically been driven by a need to temporarily
replace full-time workers due to illness, vacation or abrupt termination. More
recently, temporary staffing has been widely accepted as a valuable tool for
managing personnel costs as an increasing number of businesses staff their
organizations with a core level of full-time personnel and utilize temporary
workers to accommodate fluctuating staffing requirements. Organizations have
also begun using temporary staffing to reduce administrative overhead by
outsourcing operations that are not part of their core business functions.
Demand for the Company's temporary employment services may be significantly
affected by the general level of economic activity in the territories served by
the Company. Traditionally, when economic activity increases, temporary
employees are often added before full-time employees are hired. However, as
economic activity slows, many companies historically reduce their utilization of
temporary employees prior to undertaking layoffs of their full-time employees.
Due to the growth in the staffing industry and changing patterns of employment,
temporary employees are increasingly becoming a permanent part of the employment
force of many companies.
The Company's Services
All temporary employees are placed on the Company's payroll and the Company
therefore assumes responsibility for all employee-related expenses, including
workers' compensation, payroll taxes, unemployment compensation insurance, and
general payroll expenses. The Company bills its clients for the hourly wages
paid to the temporary employee placed with the client, plus a negotiated markup.
Because the Company pays it temporary employees only for the hours actually
worked, these wages are a variable cost that increases or decreases in
proportion to revenues. The Company also generates fee income from the placement
of staff in long-term positions with clients.
In addition to the cost of services (which, as indicated above, consists
primarily of payroll and related expenses), the Company's operating expenses are
classified as general and administrative (which are those costs associated with
the Company's administrative and branch offices, including management, account
representative and support staff compensation, rent, office expenses, applicant
recruiting expenses, and legal, accounting and other professional expenses) and
selling expenses (which consist primarily of compensation of the Company's sales
staff, advertising expenses, promotion expenses, and sales-related travel
expenses).
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The Company utilizes a decentralized branch office management strategy.
Each of the Company's branch offices operates as an independent, entrepreneurial
unit. This management approach allows the account representative to manage all
aspects of the temporary staff recruiting and assignment process, with the
objective of promoting quality service and continued client satisfaction and
goodwill. Sales representatives are assigned to one or more branch offices to
promote the Company's services and obtain new clients. The branch manager is
responsible for all aspects of the sales and service functions to clients.
The Company operates each branch office as a profit center. Branch office
staff share in monthly bonuses directly based on their office's monthly
financial results. In addition, most Company staff share in a semi-annual bonus
pool that is a function of total Company performance. Management believes these
bonus programs develop and maintain a team spirit concept and create substantial
performance incentives at the branch level and on a Company-wide basis.
The Company provides its clients with many human resource services on an
as-needed basis. These services include wage rate information, employee
regulation advice (such as information on the Americans with Disabilities Act),
workplace safety advice and occasional seminars on various employee and
employment topics.
The Company believes that the high quality of its services has been a
significant factor in its ability to attract, satisfy and retain clients. The
Company offers clients the benefits of its "temp-to-perm" program. This program
allows a client to use a temporary employee for a specified period at regular
billing rates and then to hire the temporary employee, if so desired, with no
extra charges. Thus, the client has the opportunity to monitor and evaluate the
temporary employee's performance with no hiring obligation. On request, the
Company also provides placement services for clerical and professional positions
on a fee basis.
The Company's "Vendor on Premise" program includes twelve major clients, or
approximately 25% of total Company revenues, as of the end of fiscal 1997. Under
this program, the Company assumes the administrative responsibilities for
coordinating all temporary staffing services at a client's locations. This
enables the Company's personnel to work on-site as a partner with its clients
and it also allows the Company to establish long-term client relationships,
which result in a more stable source of revenue.
The Company's in-house training department conducts extensive programs for
its internal management and its sales and support staff that provides for
uniform and consistent employee conduct in most aspects of branch office
operations. These training programs include such topics as computer system
utilization, applicant interviewing procedures, screening procedures, testing
procedures, difficult situation workshops, workers' compensation claim
processing, manager training, sales training, and client service workshops.
The Company's administrative subsidiary provides many centralized functions
that allow the decentralized branch offices to operate more efficiently. These
functions include recruiting internal staff, workers' compensation and other
insurance services, training, payroll, billing, accounts payable, purchasing,
credit and collections, accounting, management information systems and other
administrative support.
At the end of fiscal 1997, the Company commenced the ISO 9002 certification
process which will provide assurance to our clients that quality management
procedures are in place. The Company expects to certify its administrative
subsidiary and four to six branch offices by late fiscal 1998.
The Company's computer system was installed in 1993 and allows employees in
branch offices and the administrative and corporate office to maintain and have
access to important Company-wide information on clients, applicants, temporary
staff on assignment and other related information. Most importantly, the system
automates most branch office operations, thus minimizing manual record keeping
and allowing any Company employee at any Company location to retrieve
information on any of the Company's thousands of applicants on file. This allows
the account representatives to scan, sort and analyze applicants for the
possibility of filling a job order through the numerous characteristics by which
each applicant could be identified.
<PAGE> 6
Clients, Marketing and Sales
The sales staff utilizes various sales techniques such as personal sales
calls, TV, radio, print and billboard advertising, printed materials for
mailing, promotional video tapes, and personal appearances and support at
business and civic functions. To evaluate a new sales prospect, the sales staff
performs investigatory procedures, including a review of the prospect's credit
history information, workers' compensation experience, and safety programs. In
addition, the sales staff completes an internally developed bill rate sheet that
provides the sales staff and branch office management a summary of the projected
profitability to the Company of the prospective business.
Through these analyses and reviews, the sales staff attempts to ascertain
significant risks and the probable profitability of each new account. This
approach permits the Company to identify, attract and retain the most profitable
accounts, rather than obtaining sales merely to capture more market share.
Temporary Employees and Recruiting
As of October 31, 1997, the Company had approximately 5,400 temporary
employees on assignment with clients. During the year ended December 31, 1997,
the Company employed approximately 34,400 temporary employees. This figure is
estimated based on the number of wage statements on Form W-2 sent to employees
for calendar 1997. The number of employees on assignment at any given time can
vary significantly depending on special project needs, seasonality and other
factors.
The Company's temporary employees are not represented by a labor
organization. The Company believes that its relations with temporary employees
are good.
The Company generally has found it easier to recruit and retain highly
qualified personnel during periods of higher unemployment and expects that it
will have to devote increasing resources to locating new highly qualified
employees if the recent lower rates of unemployment continue. Additional
resources devoted to recruiting and retention of temporary personnel during
fiscal 1997 include a comprehensive benefit program consisting of health, life
insurance, vacation and holiday benefits, and the hiring of a national
recruiting director to conduct andz assist branch personnel in their recruiting
efforts. Although the Company's competitors, as well as its clients, similarly
experience increased recruiting and hiring expenses in periods of low
unemployment, the Company may be unable to pass on the full amount of such
increased costs in the form of higher prices for its staffing services. Such
inability would result in lower net income.
The Company believes that the high quality of its temporary personnel has
been a significant factor in its previous success and will continue to
contribute to its success. The Company believes that this high quality results,
in part, from its stringent screening, reference checking and testing
procedures. In addition to stringent screening, reference checking and testing
procedures, the opportunity of obtaining full time work through the Company's
"temp-to-perm" program has greatly assisted the Company in attracting higher
quality applicants. As described above, this concept allows a client to use the
Company's temporary staff for a negotiated minimum period of time at regular
temporary staff billing rates, and then hire the temporary staff, if so desired,
at no additional charge. Similarly, the temporary has the opportunity to begin
an assignment as a temporary and to eventually achieve a full-time long-term job
with a client.
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
correcting 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.
The preceding sentence is a forward-looking statement; a variety of factors
could cause the financial impact of resolving Year 2000 issues to differ
materially from the immaterial impact that is presently expected.
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Regulation
Each of the Company's branch offices may be subject to licensure as an
employment agency under the laws of the various states in which such offices may
from time to time be located. Compliance with such licensure laws has not had a
material adverse effect upon the Company.
Workers' Compensation and Other Employee Costs
The Company is required to pay unemployment insurance premiums and workers'
compensation for its temporary employees. Unemployment insurance premiums are
subject to increase or decrease as a result of, among other things, changes in
levels of unemployment or periods for which unemployment benefits may be
available under applicable laws and the Company's unemployment experience.
Workers' compensation costs are subject to increase or decrease as a result of
changes in the Company's loss experience rating and applicable state workers'
compensation laws.
The Company's workers' compensation insurance is subject to a $250,000
deductible per occurrence, and an unlimited aggregate annual deductible. There
is no guarantee that the Company will be able to obtain renewal coverage in
amounts and types desired at reasonable premium rates or that premiums for
existing insurance will not be adjusted by the insurance carriers based on
future claims experience.
The Company's workers' compensation insurance carriers have required the
Company to cause its bank lender to issue irrevocable letters of credit to
assure the Company's ability to pay injured workers in accordance with state
workers' compensation regulations. At October 31, 1997, these letters of credit
aggregated $900,000 and they reduce the amount available to the Company from its
bank lender under its credit facility.
The Company employs a workers' compensation staff to control and monitor
the Company's workers' compensation claims and expenses. The workers'
compensation staff attempts to contain workers' compensation expenses by
establishing controls and procedures to review client work site risks, develop
improved safety training programs, review workers' compensation employee injury
reports for propriety, review medical provider charges for reasonableness and
monitor the injured employee's medical recovery for timely return to work.
The Company has reserved $1,024,000 as of October 31, 1997 for pending
claims. Although there can be no assurance that the Company's actual future
workers' compensation obligations for claims pending as of October 31, 1997,
will not exceed the amount of its workers' compensation reserves, management
believes the recorded reserve is adequate.
Employment Laws
Providers of temporary staffing services employ and place people
generally in the workplace of other businesses. An attendant risk of such
activity includes possible claims of discrimination and harassment, employment
of illegal aliens and other similar claims. Management has adopted and
implemented policies and guidelines to reduce its exposure to these risks.
However, a failure of any Company employee to follow these policies and
guidelines may result in negative publicity, injunctive relief and the payment
by the Company of money damages or fines. Moreover, in certain circumstances,
the Company may be held responsible for the actions at a workplace of persons
not under the direct control of the Company.
Management, Sales and Support Personnel
The Company employed approximately 216 regular full-time (internal staff)
employees as of October 31, 1997. The Company's regular employees are not
represented by a labor organization and the Company believes that its employee
relations are good.
Competition
The staffing industry is highly competitive and has low entry barriers for
companies wishing to enter the business. The Company faces intense competition
from large national, international, regional and local companies and newly
established companies. The Company's competitors include companies such as
Manpower, Inc., Kelly Services, Inc., The Olsten Corporation and AccuStaff
Incorporated, which are national in scope and have substantially greater
financial and marketing resources than the Company.
<PAGE> 8
The Company competes both for qualified temporary personnel and for clients
seeking to employ temporary personnel. The principal competitive factors in
attracting qualified temporary personnel are salaries and benefits, quality of
assignments and responsiveness to the needs of the employees. The Company
believes that many persons who seek temporary employment through the Company are
also seeking long-term employment. Therefore, the availability of appropriate
assignments is an important factor in the Company's ability to attract qualified
temporary personnel.
The principal competitive factors in obtaining and retaining clients are
having sufficient qualified temporary personnel to assign in a timely manner,
having an understanding of the specific job requirements of each client to help
assure an appropriate placement, pricing services competitively and monitoring
job performance. The Company believes that it has been able to compete
successfully in the temporary personnel services industry because of the
combination of its human resource expertise, its strategy of using qualified
temporary personnel, and its ability to identify and satisfy the temporary
staffing needs of clients.
ITEM 2. PROPERTIES.
The Company provides temporary staffing services through 41 branch offices
in Indiana, Florida, Kentucky and Georgia as of October 31, 1997. All of these
offices are leased by the Company under short-term leases typically on three- to
five-year original terms. The Company's Columbus, Rushville, Franklin, and
Shelbyville, Indiana offices are leased from JBD Real Estate, Inc. (a
corporation that is owned by Don R. Taylor, the Chief Executive Officer of the
Company, a Director, and a significant shareholder of the Company). The Company
does not expect that maintaining or finding suitable office space at reasonable
rates in the above market locations or in areas where the Company anticipates
expanding will be difficult.
The Company's executive and administrative office is presently located in
approximately 9,000 square feet of leased space in Greenwood, Indiana (a south
suburb of Indianapolis) under a lease expiring in 1999.
ITEM 3. LEGAL PROCEEDINGS.
As previously reported, the Company and certain of its subsidiaries have
been named Defendants in a lawsuit pending in the Hillsborough County Circuit
Court (13th Judicial Circuit,f Florida) under the caption Liberty Mutual
Insurance Co. vs. Allen Staffing Inc., et al. (Case No. 97C452). This action was
filed January 22, 1997 against certain Florida temporary staffing companies (the
"Porter Temporary Companies"); R. Gale Porter and other entities and individuals
associated with the Porter Temporary Companies; and the Company and certain of
its subsidiaries. The Company acquired substantially all the operating assets of
certain of the Porter Temporary Companies effective July 4, 1994.
Plaintiff Liberty Mutual alleges in its Amended Complaint that premiums for
workers' compensation insurance charged to the Porter Temporary Companies for
certain policy periods ended prior to July 4, 1994 were undercharged on the
basis of fraudulent misrepresentations or omissions by the Porter Temporary
Companies in their applications for workers' compensation insurance. Liberty
Mutual seeks damages from the Company and its subsidiaries for alleged breach of
contract, alleged fraud in the inducement, and alleged violations of Florida
statutes, by the Porter Temporary Companies in the amount of the alleged earned
but unpaid premium of approximately $1,402,000 plus unspecified additional
damages, or, in the alternative, ten times the amount of the premium underpaid
pursuant to Florida statutory provisions, plus punitive damages, attorney's
fees, costs and interest. Liberty Mutual claims that the Company should be held
liable for these alleged pre-acquisition obligations of the Porter Temporary
Companies on the alternative theories that (a) the continued operation by the
Company of the businesses of the Porter Temporary Companies at the same location
and under the same management personnel constitutes a mere continuation of the
business, and/or (b) the sale of the assets to the Company was a fraudulent
effort to avoid debts and liability incurred by the Porter Temporary Companies.
In the agreement by which it acquired the assets of the Porter Temporary
Companies, the Company expressly disclaimed that it was assuming any obligation
whatsoever with regard to the Porter Temporary Companies' undisclosed
liabilities. The Company intends to vigorously defend the lawsuit and has filed
a motion to dismiss the amended claims made against it and its subsidiaries, and
a motion to strike Liberty Mutual's attorney's fees, punitive damages, and "ten
fold" penalty demands. Although due to the early stage of this lawsuit, the
Company has not undertaken any comprehensive evaluation of Liberty Mutual's
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. The
preceding sentence is a forward-looking statement; 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.
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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 statement; 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.
As discussed under Item 1, "Business--Employment Laws," above, an attendant
risk of employing and placing people in the workplace of other businesses is the
possibility of claims of discrimination and harassment, employment of illegal
aliens, and similar claims arising under federal, state and local laws and
ordinances. The Company is a defendant or respondent in a number of proceedings
involving claims of these types, but such proceedings are considered routine
proceedings that are incidental to its business. Although the Company has no
reason to believe that it will experience any material loss as the result of
these proceedings, this is a forward-looking statement. There can be no
assurance that material losses will not result from one or more of such
proceedings due to the risks that are inherent in litigation, including the
possibility that relevant facts indicating liability could possibly exist with
respect to one or more of the pending proceedings that are not presently known
to Company management and its counsel. There are no other pending material legal
proceedings to which the Company is a party (or to which its property is
subject) and the Company is not aware that any governmental authority is
contemplating the bringing of any such legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the quarter
ended October 31, 1997.
SPECIAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information relating to the
executive officers of the Company as of January 1, 1998.
Name Age Offices Held
Don R. Taylor 50 Chief Executive Officer
Gary F. Hentschel 39 President and Chief Operating Officer
Robert R. Millard 40 Vice President of Finance and
Administration, Chief Financial
and Accounting Officer, Treasurer
and Secretary
Officers are elected annually by the Board of Directors and serve for a
one-year period or until their successors are elected. There are no family
relationships between or among the persons named.
Except as indicated below, each of the officers has held the same or
similar position with the Company for the past five years.
Mr. Taylor had served as both President and Chief Executive Officer of the
Company since its founding in 1986. Effective July 1, 1997, Mr. Taylor resigned
as President and Mr. Hentschel was appointed to that office.
Mr. Hentschel has served as Chief Operating Officer since July 1996, and
effective July 1, 1997, he was also named President. From 1994 to July 1996, Mr.
Hentschel had served as Executive Vice President for KeyBank, and prior to 1994,
he had served as Senior Vice President of KeyBank.
Mr. Millard was appointed Chief Financial Officer and Vice President of
Finance and Administration in February 1996. From July 1991 to February 1996,
Mr. Millard had served as Corporate Controller for Lacy Diversified Industries,
Ltd. Mr. Millard also serves as Secretary and Treasurer of the Company.
<PAGE> 10
PART II
The information for Items 5 through 8 of this Report appears in the
1997 Annual Report to Shareholders (on the pages and under the captions
indicated) and is incorporated herein by reference from the Annual Report to
Shareholders (page numbers refer to the pages as numbered in Exhibit 13 attached
to this Report):
ITEM 5. MARKET FOR THE CORPORATION'S COMMON SHARES AND RELATED SECURITY HOLDER
MATTERS
Annual Report to Shareholders Page
Common Stock 24
ITEM 6. SELECTED FINANCIAL DATA
Annual Report to Shareholders Page
Selected Financial and 1
Operating Data
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Annual Report to Shareholders Page
Management's Discussion and 2 through 6
Analysis of Financial Condition
Results of Operations
<PAGE> 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Annual Report to Shareholders Page
Report of Independent Auditors 7
Consolidated Balance Sheets 8
Consolidated Statements of Income 9
Consolidated Statements of Cash Flows 10
Consolidated Statements of Shareholders' 11
Equity
Notes to Consolidated Financial 12 through 22
Statements
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The information required in response to this Item 9 was previously reported
on a Form 8-K dated October 24, 1997, and filed on October 28, 1997, as amended
by an amended Form 8-K dated November 3, 1997, and filed on November 7, 1997,
and a Form 8-K dated November 20, 1997, and filed on November 24, 1997.
PART III
Except as set forth below in "Directors and Executive Officers of the
Corporation," the information for Items 10 through 13 of this Report is
incorporated herein by reference from the Company's definitive Proxy Statement
for its Annual Meeting of Shareholders to be held March 5, 1998, which will be
filed with the Commission pursuant to Regulation 14A on or about February 16,
1998.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
The information required by this item relating to Executive Officers is
found under the heading "Special Item. Executive Officers of the Registrant" in
Part I of this Report. The information required by this item relating to
Directors will be included under the caption "Election of Directors" in the
Company's definitive Proxy Statement for its Annual Meeting of Shareholders to
be held March 5, 1998, which will be filed with the Commission within 120 days
of the end of the Registrant's fiscal year and is incorporated by reference in
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included under the captions
"Executive Compensation," "Report of the Compensation Committee of the Board of
Directors on Executive Compensation," "Compensation Committee Interlocks and
Insider Participation," "Performance Graph," and "Certain Transactions," in the
Company's definitive Proxy Statement for its Annual Meeting of Shareholders to
be held March 5, 1998, which will be filed with the Commission within 120 days
of the end of the Registrant's fiscal year and is incorporated by reference in
this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be included under the captions
"Election of Directors" and "Principal Owners of Common Shares" in the Company's
definitive Proxy Statement for its Annual Meeting of Shareholders to be held
March 5, 1998, which will be filed with the Commission within 120 days of the
end of the Registrant's fiscal year and is incorporated by reference in this
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be included under the caption
"Certain Transactions" in the Company's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held March 5, 1998, which will be filed
with the Commission within 120 days of the end of the Registrant's fiscal year
and is incorporated by reference in this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The financial statements and documents listed below are filed as part of
this Report.
(a)1. Financial Statements
The following financial statements are incorporated by reference from
the 1997 Annual Report to Shareholders as indicated (page numbers refer to the
pages as numbered in Exhibit 13 attached to this Report).
Annual Report to Shareholders Page
Report of Independent Auditors 7
Consolidated Balance Sheets as of 8
October 31, 1997 and 1996
Consolidated Statements of Income for 9
the years ended October 31, 1997,
1996 and 1995
Consolidated Statements of Cash Flows 10
for the years ended October 31,
1997, 1996 and 1995
Consolidated Statements of 11
Shareholders' Equity for the
years ended October 31, 1997,
1996 and 1995
Notes to Consolidated Financial
Statements 12 through 22
(a)2. Schedules
All schedules have been omitted because the required information is either
inapplicable or has been included in the Company's consolidated financial
statements or notes thereto.
(a)3. Exhibits
The exhibits filed as part of this report on Form 10-K are identified in
the Exhibit Index, which Exhibit Index includes a column specifically
identifying those exhibits that describe or evidence all management contracts
and compensatory plans or arrangements required to be filed as exhibits to this
report. Such Exhibit Index is incorporated herein by reference.
(b) Reports on Form 8-K.
During the quarter ended October 31, 1997, the following reports on Form
8-K were filed:
Date Filed Item Number Description
10/28/97 4 Reported on dismissal of Price
Waterhouse LLP as independent
accountants
11/7/97 4 Amended previous report to attach
letter from Price Waterhouse LLP
dated November 3, 1997, as an
exhibit
11/24/97 4 Reported engagement of Ernst &
Young LLP on November 20, 1997
<PAGE> 13
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf, by the undersigned,
thereunto duly authorized.
PERSONNEL MANAGEMENT, INC.
By /s/ Don R. Taylor
-------------------------
Don R. Taylor,
Chief Executive Officer
Date: January 29, 1998
In accordance with the Exchange Act, this report was signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Don R. Taylor Chief Executive Officer January 29, 1998
Don R. Taylor (Principal Executive Officer);
Director
/s/ Robert R. Millard Vice-President -- January 29, 1998
Robert R. Millard Finance & Administration
(Principal Accounting Officer and
Principal Financial Officer)
- ------------------------ Director January 29, 1998
Joseph C. Cook
- ------------------------ Director January 29, 1998
Max K. DeJonge
/s/ David L. Swider Director January 28, 1998
David L. Swider
/s/Richard L. VonDerHaar Director January 29, 1998
Richard L. VonDerHaar
<PAGE> 14
EXHIBIT INDEX
(IDENTIFYING EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS)
Executive Incorporated Compensation
Exhibit Description of SB-2 Exhibit Plans and
Number Exhibit Number* Arrangements**
3.1 Restated Articles of 3.1
the Company*
3.2 Restated Bylaws of the 3.2
Company*
4.1 Third Amended and Restated N/A
Credit Facility and
Security Agreement, dated
January 21, 1997, by and
among the Registrant, PMI
Administration, Inc.,
PMI LP I, PMI LP II and
KeyBank National
Association. The copy of
this document filed as
Exhibit 4.2 to the
Company's Form 10-K for
the fiscal year ended
October 31, 1996, is
incorporated by reference.
10.1 Employment Agreement 10.1 X
between the Company and
Don R. Taylor, dated
January 1, 1994*
10.2 Employment Agreement 10.2 X
between the Company and
Elizabeth McFarland,
dated January 1, 1994*
10.3 Asset Purchase Agreement N/A
dated January 24, 1996, by
and among PMI LP II, Progressive
Personnel II, Inc., Dan K. Wilson,
and David K. Wilson. The copy
of the exhibit filed as Exhibit 2.1
to the Registrant's Current Report
on Form 8-K dated February 5, 1996,
is incorporated herein by reference.
10.4 First Amendment to N/A X
Employment Agreement between
the Company and Don R. Taylor,
dated September 12, 1995.
The copy of this exhibit filed
as Exhibit 10.4 to the Company's
Form 10-KSB for the fiscal year
ended October 31, 1995,
is incorporated by reference.
10.5 Second Amended and N/A
Restated Credit Facility
and Security Agreement
dated November 29,
1995, by and between the
Registrant, PMI
Administration, Inc.,
PMI LP I, PMI LP II, and
Society National Bank,
Indiana. The copy of this
exhibit filed as Exhibit 4
to Registrant's Current
Report on Form 8-K dated
February 5, 1996 is
incorporated herein by reference.
10.60 Third Amended and Restated N/A
Credit Facility and Security
Agreement, dated January 21, 1997,
by and among the Registrant, PMI
Administration, Inc., PMI LP I, PMI
LP II and KeyBank National Association.
The copy of this exhibit filed as
Exhibit 4 to the Company's Annual
Report on Form 10-K for the fiscal
year ended October 31, 1996, is
incorporated herein by reference.
10.7 Amended and Restated 10.4 X
1993 Stock Option Plan*
10.8 1994 Stock Option Plan* 10.5 X
10.9 1994 Director Stock N/A X
Option Plan. The copy
of this exhibit filed
as Exhibit 10.1 to the
Company's Form 10-QSB for
the quarter ended April
30, 1995, is incorporated
by reference.
10.10 Incentive Stock Option 10.6 X
Agreement between the
Company and Elizabeth
McFarland, dated
February 28, 1993*
10.11 Stock Option Agreement 10.8 X
between the Company and
Elizabeth McFarland,
dated December 3, 1993*
10.12 Stock Option Agreement N/A X
between the Company and
Elizabeth McFarland,
dated December 29, 1994.
The copy of this exhibit
filed as Exhibit 10.9 to the
Company's Annual Report on
Form 10-KSB for the fiscal year
ended October 31, 1995, is
incorporated by reference.
10.13 Incentive Stock Option N/A X
Agreement between the
Company and Elizabeth
McFarland, dated December
29, 1994. The copy of
this exhibit filed as
Exhibit 10.10 to the
Company's Annual Report
on Form 10-KSB for its
fiscal year ended October
31, 1994, is incorporated
by reference.
10.14 Stock Option Agreement N/A X
between the Company and
James E. Burnette, dated
July 1, 1995. The copy
of this exhibit filed
as Exhibit 10.1 to the
Company's Form 10-QSB
for the quarter ended
July 31, 1995, is
incorporated by reference.
10.15 Amended Schedule of N/A X
Options Granted under
1994 Director Stock
Option Plan.
10.16 Underwriting Agreement N/A
among the Company,
Carolyn S. Taylor,
David A. Noyes & Company,
and Howe Barnes Investments,
Inc., dated January 26, 1994.
The copy of this exhibit
filed as Exhibit 10.9 to
Company's Form 10-QSB for the
quarter ending January 31, 1994,
is incorporated by reference.
10.17 Schedule of Terms of N/A
Warrant granted by
Carolyn S. Taylor (and
also executed by the
Company) to David A.
Noyes & Company (and
its assigns) on February
22, 1994. The copy of
this exhibit filed as
Exhibit 10.11 to the
Company's Form 10-QSB
for the quarter ended
January 31, 1994, is
incorporated by reference.
10.18 Schedule of Terms of N/A
Warrants granted by
the Company to David A.
Noyes & Company (and its
assigns) on February
22, 1994. The copy of this
exhibit filed as Exhibit
10.10 to the Company's Form
10-QSB for the quarter ended
January 31, 1994, is
incorporated by reference.
10.19 Tax Indemnification N/A
Agreement dated January
31, 1994. The copy of this exhibit
filed as Exhibit 10.12 to the
Company's Form 10-QSB for the
quarter ended January 31, 1994,
is incorporated by reference.
10.20 Stock Purchase Agreement 10.12
between the Company and
Elizabeth McFarland,
dated December 3, 1993*
10.21 Wage Continuation Plan in 10.14 X
the Event of Disability,
dated December 6, 1991*
10.22 Lease between PMI Real 10.15
Estate, Inc. and the
Company, dated February
1, 1993 (Rushville,
Indiana office)*
10.23 Lease between PMI Real 10.16
Estate, Inc. and the
Company, dated February
25, 1993 (Columbus,
Indiana office)*
10.24 Lease between PMI Real 10.17
Estate, Inc. and the
Company, dated February
25, 1993 (Franklin,
Indiana office)*
10.25 Inducement Agreement 10.26
among the Company, Carolyn
Taylor, David A. Noyes &
Company and Don R. Taylor
dated November 19, 1993*
10.26 Stockholders Agreement 10.27
among the Company, Don
R. Taylor, Elizabeth
McFarland, James Burnette,
Carolyn Taylor, Carol
Browning, Wendy Rusk,
John Dearth, Rhonda
Schwegman, Joanna Smith,
Marsha Strain and Alise
Wilson, dated November
19, 1993*
10.27 Form of letter dated N/A
June 28, 1995, from the Company,
Don R. Taylor, Elizabeth McFarland
and James E. Burnette to the
"Other Investors" described by
Stockholders Agreement dated
November 19, 1993. The copy of
this exhibit filed as Exhibit
10.30 to the Company's Annual
Report on Form 10-KSB for the
fiscal year ended October 31, 1995,
is incorporated by reference.
10.28 Promissory Note from Don 10.28
Taylor to the Company,
dated December 11, 1992*
10.29 Promissory Note from Don 10.29
Taylor to the Company,
dated December 7, 1993*
10.30 Second Amended and N/A X
Restated Loan Plan for
Key Employees. The copy of
this exhibit filed as
Exhibit 10.33 to the
Company's Annual Report
on Form 10-KSB for the
fiscal year ended
October 31, 1995, is
incorporated herein by
reference.
10.31 Promissory Note from N/A
Elizabeth McFarland
to the Company, dated
December 29, 1994.
The copy of this exhibit
filed as Exhibit 10.27
to the Company's Annual
Report on Form 10-KSB
for its fiscal year ended
October 31, 1994, is
incorporated by reference.
10.32 Description of Certain N/A X
Compensatory Plans,
Contracts or Arrangements
(all such plans, contracts
or arrangements are filed
as exhibits to this Form 10-K).
10.33 Asset Purchase Agreement N/A
dated June 30, 1994 by
and among PMI LP II,
Personnel Management,
Inc., Porter Management
Group, Inc., Office Staff,
Inc., Team Temps, Inc.,
Law Connection, Inc. and
R. Gale Porter. The copy
of this exhibit filed as
Exhibit 2.1 to the Company's
Current Report on Form 8-K
dated June 30, 1994, is
incorporated by reference.
10.34 Asset Purchase Agreement N/A
dated September 1, 1994
by and among PMI LP I,
Human Resource Services,
Inc., Phillip E. Cole
and Robert Shuherk. The
copy of this exhibit
filed as Exhibit 2.1
to the Company's Current
Report on Form 8-K dated
September 1, 1994, is
incorporated by reference.
10.35 Asset Purchase Agreement N/A
dated September 1, 1994
by and among PMI LP I,
Human Resources, Inc.
and Phillip E. Cole.
The copy of this exhibit
filed as Exhibit 2.2 to
the Company's Current
Report on Form 8-K dated
September 1, 1994, is
incorporated by reference.
10.36 Stock Purchase Agreement N/A
dated October 18, 1994
by and among the Company,
Quest Personnel Search,
Inc., Southern Indiana
Temporaries, Inc., Richard
H. McGinnis, Mary Anne
McGinnis, Keith Legg, Nancy
S. Legg, William M. Dixon,
Pamela Dixon, and Richard
W. McGinnis, Sr. The copy
of this exhibit filed as
Exhibit 2.1 to the Company's
Current Report on Form 8-K
dated October 18, 1994,
is incorporated by reference.
10.37 Lease between JBD Real N/A
Estate, Inc. and PMI LP I,
dated September 1, 1994 (Columbus,
Indiana office). The copy of this
exhibit filed as Exhibit 10.36
to the Company's Annual Report on
Form 10-KSB for its fiscal year
ended October 31, 1995, is incorporated
by reference.
10.38 Lease between JBD Real N/A
Estate, Inc. and PMI LP
I, dated September 1, 1994
(Franklin, Indiana office).
The copy of this exhibit filed
as Exhibit 10.37 to the Company's
Annual Report on Form 10-KSB for its
fiscal year ended October 31, 1995, is
incorporated by reference.
10.39 Lease between JBD Real N/A
Estate, Inc. and PMI LP
I, dated September 1, 1994
(Rushville, Indiana office).
The copy of this exhibit filed
as Exhibit 10.38 to the Company's
Annual Report on Form 10-KSB for
its fiscal year ended October 31,
1995, is incorporated by reference.
10.40 Lease between JBD Real N/A
Estate, Inc. and PMI LP I,
dated September 26, 1995
(Shelbyville, Indiana office)
The copy of this exhibit filed
as Exhibit 10.46 to the Company's
Annual Report on Form 10-KSB
for its fiscal year ended October
31, 1995, is incorporated by reference.
10.41 Note Modification N/A
Agreement between the
Company, PMI Administration,
Inc., PMI LP I, PMI LP II and
Society National Bank, Indiana,
dated February 28, 1995. The
copy of this exhibit filed as
Exhibit 10.3 to the Company's
Form 10-QSB for the quarter ended
April 30, 1995, is incorporated by
reference.
10.42 Second Amended and N/A
Restated Master
Promissory Note, made
by the Company to
Society National Bank,
Indiana, dated June 9,
1995. The copy of this
exhibit filed as Exhibit
10.3 to the Company's
Form 10-QSB for the
quarter ended July 31,
1995, is incorporated
by reference.
10.43 Commitment letter for N/A
$700,000 overline credit
facility from Society National
Bank, Indiana, to the Company
dated September 1, 1995. The
copy of this exhibit filed
as Exhibit 10.4 to the Company's
Form 10-QSB for the quarter ended July
31, 1995, is incorporated incorporated
by reference.
10.44 Employment Agreement N/A X
between the Company and
Don R. Taylor, dated
November 8, 1995. The
copy of this exhibit filed
as Exhibit 10.2 to the
Company's Form 10-Q for the
quarter ended April 30,
1996 is incorporated by
reference.
10.45 Employment Agreement N/A X
between the Company and
Elizabeth McFarland, dated
November 8, 1995. The copy of
this exhibit filed as Exhibit
10.3 to the Company's Form
10-Q for the quarter ended
April 30, 1996 is incorporated
by reference.
10.46 Employment Agreement between N/A X
the Company and Robert R.
Millard, dated February 5,
1996. The copy of this exhibit
filed as Exhibit 10.4 to the
Company's Form 10-Q for the
quarter ended quarter
ended April 30, 1996 is
incorporated by reference.
10.47 Change of Control N/A X
Severance Benefits Agreement
between the Company and Don R.
Taylor, dated November 8, 1995.
The copy of this exhibit filed
as Exhibit 10.5 to the
Company's Form 10-Q for the
quarter ended April 30, 1996 is
incorporated by reference.
10.48 Change of Control N/A X
Severance Benefits
Agreement between
the Company and Elizabeth
McFarland, dated November
8, 1995. The copy of
this exhibit filed as
Exhibit 10.6 to the
Company's Form 10-Q
for the quarter ended
April 30, 1996 is
incorporated by reference.
10.49 Change of Control N/A X
Severance Benefits
Agreement between the
Company and Robert R. Millard,
dated February 5, 1996. The copy
of this exhibit filed as
Exhibit 10.7 to the Company's
Form 10-Q for the quarter ended
April 30, 1996, is incorporated
by reference.
10.50 Incentive Stock Option N/A X
Agreement between the Company
and Robert R. Millard, dated
February 5, 1996. The copy
of this exhibit filed as
Exhibit 10.8 to the Company's
Form 10-Q for the quarter
ended April 30, 1996, is
incorporated by reference.
10.51 Promissory Note between N/A
the Company and Elizabeth
McFarland, dated April 15, 1996.
The copy of this exhibit filed as
Exhibit 10.9 to the Company's
Form 10-Q for the quarter ended April 30,
1996, is incorporated by reference.
10.52 Pledge Agreement between N/A
the Company and Elizabeth
McFarland, dated April 15, 1996.
The copy of this exhibit filed as
Exhibit 10.10 to the Company's
Form 10-Q for the quarter ended April
30, 1996, is incorporated by reference.
10.53 Employment Agreement N/A X
between the Company and
Gary F. Hentschel, dated
July 15, 1996. The copy
of this exhibit filed as
Exhibit 10.2 to the
Company's Form 10-Q
for the quarter ended July
31, 1996, is incorporated
by reference.
10.54 Change of Control N/A X
Severance Benefits Agreement
between the Company and Gary F.
Hentschel, dated July 15, 1996.
The copy of this exhibit filed as
Exhibit 10.3 to the Company's
Form 10-Q for the quarter
ended July 31, 1996, is
incorporated by reference.
10.55 Incentive Stock Option N/A X
Agreement between the
Company and Gary F. Hentschel,
dated July 15, 1996. The copy of
this exhibit filed as
Exhibit 10.4 to the Company's
Form 10-Q for the quarter ended
July 31, 1996, is incorporated by
reference.
10.56 Incentive Stock Option N/A X
Agreement between the
Company and Elizabeth
McFarland, dated June 10,
1996. The copy of this exhibit
filed as Exhibit 10.5 to the
Company's Form 10-Q for the
quarter ended July 31,
1996, is incorporated by reference.
10.57 Asset Purchase Agreement N/A
dated November 13, 1995,
by and among PMI LP II,
Temporaries of Atlanta,
Inc., James A. Selton,
Howard J. Kaston, and
International Temporaries,
Inc. The copy of this
exhibit filed as Exhibit
10.1 to the Registrant's
Current Report on Form 8-K
dated November 13, 1995,
is incorporated herein by
reference.
10.58 Asset Purchase Agreement, N/A
dated March 17, 1997, by and
among PMI LP I, Garner Scott
Enterprise, Inc., Donald W.
Garner and Shirley A. Garner
(schedules and exhibits omitted).
10.59 Asset Purchase Agreement, dated N/A
March 24, 1997, by and among PMI LP
I, First in Temporaries, Inc.,
and Frank L. Hartman (schedules and
exhibits omitted)
10.60 Waiver, dated February 17, 1997, N/A
of certain provisions in Change
Control Severance Benefits Agreement,
dated November 8, 1995, between the
Company and Don R. Taylor
10.61 Waiver, dated February 17, 1997, N/A
of certain provisions in Change
Control Severance Benefits Agreement,
dated July 15,1996, between
the Company and Gary F. Hentschel
10.62 Waiver, dated February 17, 1997,
of certain provisions in Change
Control Severance Benefits Agreement,
dated February 5, 1996,
between the Company and Bob Millard N/A
11 Statement Re: Computation N/A
of Per Share Earnings
13 Registrant's 1997 Annual Report to N/A
Shareholders (portions incorporated
by reference).
21 List of Subsidiaries N/A
<PAGE>
23 Consent of Ernst & N/A
Young LLP to
incorporation by
reference of audit
report into Form S-8
Registration Statement.
27 Financial Data Schedule N/A
*Indicates exhibits incorporated by reference from the Company's Registration
Statement on Form SB-2 (No. 33-72872C) originally filed December 13, 1993, as
amended.
** Indicates exhibits that describe or evidence all management contracts or
compensatory plans or arrangements required to be filed as exhibits to this
report.
EXHIBIT 10.15
<TABLE>
AMENDED SCHEDULE OF OPTIONS GRANTED
UNDER 1994 DIRECTOR STOCK OPTION PLAN
(THROUGH OCTOBER 31, 1997)
<CAPTION>
Number of Date of Option Option
Grantee Options Granted* Grant Price* Period
<S> <C> <C> <C> <C>
Joseph C. Cook, Jr. 550 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
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
David L. Swider 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
1,100 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
<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
1,100 01/31/96 5.90 01/30/2001
550 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
Max K. DeJonge 550 10/31/95 $9.08 10/30/2000
550 01/31/96 5.90 01/30/2001
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
</TABLE>
*All grants prior to April 24, 1995 retroactively adjusted for ten percent stock
dividend paid on that date.
8822
EXHIBIT 10.58
----------------------------------------------------
ASSET PURCHASE AGREEMENT
Dated March 17, 1997,
by and among
PMI LP I,
GARNER SCOTT ENTERPRISE, INC.,
DONALD W. GARNER
and
SHIRLEY A. GARNER
----------------------------------------------------
<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
Section 2.1 Purchase Price and Payment Method 3
Section 2.2 Seller's Right to Audit 5
Section 2.3 Establishing and Resolving Disagreements 5
ARTICLE III. Assumption of Liabilities 6
Section 3.1. Assumed Liabilities 6
Section 3.2. Excluded Liabilities 6
ARTICLE IV. Closing and Effective Time 6
Section 4.1. Closing; Closing Date; Effective Time 6
Section 4.2. Closing Requirements 6
ARTICLE V. Other Actions, Agreements and Covenants of the Parties 8
Section 5.1. Assignment of Contracts 8
Section 5.2. Delivery of Property Received After Effective Time 8
Section 5.3. Purchaser Appointed Attorney for Seller 8
Section 5.4. Execution of Further Documents; Financial Statements 8
Section 5.5. Employment by Purchaser of Seller's Employees 9
Section 5.6. Noncompetition and Confidentiality Agreement 9
Section 5.7. IRS Form 8594 9
Section 5.8. COBRA and Other Compliance 9
Section 5.9. Rental of Carrollton Office 9
ARTICLE VI. Representations and Warranties by Seller and the Garners 10
Section 6.1. Corporate Existence and Qualification 10
Section 6.2. Subsidiaries and Affiliates 10
Section 6.3. Financial Statements 10
Section 6.4. Events Subsequent to Latest Seller Financial Statements 10
Section 6.5. Undisclosed Liabilities 12
Section 6.6. Tax Returns 12
Section 6.7. Real Property 12
Section 6.8. Personal Property - Owned 13
Section 6.9. Personal Property - Leased 13
Section 6.10. Use and Condition of Property; Environmental Concerns 13
Section 6.11. Restrictive Covenants 14
Section 6.12. Intellectual Property Rights 14
Section 6.13. Necessary Property 14
Section 6.14. No Breach, Default or Violation 14
Section 6.15. Litigation and Claims 14
Section 6.16. Material Contracts 14
Section 6.17. Validity of Purchased Contracts 15
Section 6.18. Powers of Attorney 15
Section 6.19. Insurance 15
Section 6.20. Employment Matters; Employee Benefit Plans; ERISA
Compliance 15
Section 6.21. Guaranties 16
Section 6.22 Compliance With Laws; Licenses 16
Section 6.23. Authorization of Agreement 16
Section 6.24. All Material Information 17
Section 6.25. Material Adverse Contract 17
Section 6.26. Copies of Documents 17
Section 6.27. Shareholders 17
Section 6.28. Consents of Third Parties 17
Section 6.29. Other Approvals 17
Section 6.30. Customer Relations 18
ARTICLE VII. Representations and Warranties by Purchaser 18
Section 7.1. Valid Existence and Qualification of Purchaser 18
Section 7.2. Authorization of Agreement by Purchaser 18
ARTICLE VIII. Indemnification 19
Section 8.1. Indemnification by Seller and the Garners 19
Section 8.2. Indemnification by Purchaser 19
Section 8.3. Survival of Covenants, Representations and Warranties 20
Section 8.4. Payment and Settlement of Amounts Due 20
ARTICLE IX. Change of Names; Use of Names by Purchaser 20
ARTICLE X. Expenses of the Parties 21
ARTICLE XI. Brokers' Commission 21
ARTICLE XII. Miscellaneous 21
Section 12.1. Waivers and Amendments 21
Section 12.2. Entire Agreement 21
Section 12.3. Headings 22
Section 12.4. Notices 22
Section 12.5. Severability 22
Section 12.6. Governing Law 23
Section 12.7. Consent to Jurisdiction 23
Section 12.8. Third Parties 23
Section 12.9. Counterparts 24
Section 12.10. Successors and Assigns 24
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 17th day of March, 1997, effective as of 12:01 a.m. on March 17,
1997 (the "Effective Time"), by and among GARNER SCOTT ENTERPRISE, INC., a
Kentucky corporation ("Seller"), DONALD W. GARNER, a Kentucky resident
("Donald"), SHIRLEY A. GARNER, a Kentucky resident ("Shirley"), and PMI LP I, an
Indiana limited partnership ("Purchaser"). Donald and Shirley are sometimes
collectively referred to herein as the "Garners".
PRELIMINARY STATEMENT
Seller conducts a temporary staffing business, and operates such
business out of offices in Madison, Indiana and Carrollton, Kentucky (the
"Business"). Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all of the non-cash assets owned by Seller
that are used or useful by Seller in the operation of the Business, on the terms
and conditions hereinafter set forth. Donald and Shirley, together with their
three daughters identified on Schedule 6.27, are the owners of 100 percent of
the outstanding capital stock 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 and that are used or useful by Seller in the operation
of the Business 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;
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 and derivatives
thereof, all past corporate names of Seller and all assumed business
names or other names used or previously used by Seller or its
predecessors in its business; and
1.1.11. the goodwill relating to Seller's customers and 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. all accounts receivable of Seller for work performed prior
to the Effective Time;
1.2.3. all notes receivable and marketable securities of Seller
at the Effective Time;
1.2.4. all motor vehicles owned or leased by Seller; and
1.2.5. all assets of Seller used exclusively in the cleaning
business operated by Seller.
ARTICLE II
Purchase Price
Section 2.1. Purchase Price and Payment Method. The total purchase
price for the Purchased Assets (the "Purchase Price") shall be an amount
determined and paid as follows:
2.1.1. Purchaser shall pay $250,000 to Seller at Closing.
2.1.2. After the Closing Purchaser shall pay to Seller such
sum or sums as shall be determined in accordance with the following
provisions:
(a) Within 100 days after the end of each of
Purchaser's fiscal years beginning with the fiscal year ending
October 31, 1997 and ending with the fiscal year ending
October 31, 2001 (the "Earnout Period"), Purchaser shall pay
to Seller, net of advances received for quarters occurring
during such fiscal year (or, as the case may be, Seller shall
pay to Purchaser any amounts owed to Purchaser by Seller due
to aggregate advances received by Seller in excess of the
amount payable by Purchaser for such fiscal year), an amount
(the "Earnout Payment") equal to 33.3 percent of the net
income before taxes, goodwill amortization and interest
expense of Purchaser for such fiscal year from the operation
of the Madison, Indiana and Carrollton, Kentucky branch
offices acquired by Purchaser pursuant to this Agreement (and
any additional offices included pursuant to subsection
2.1.2(c) below). Within 45 days after the end of each fiscal
quarter of Purchaser during the Earnout Period Purchaser shall
advance to Seller, as refundable advances to be applied
against the Earnout Payment that will be owed for the
applicable fiscal year, an amount reasonably estimated by
Purchaser to be the Earnout Payment amount that will be
attributable to such fiscal quarter based on the results of
Purchaser's operations during such quarter.
(b) Within 100 days after the end of the
period beginning November 1, 2001 and ending February 28, 2002
(the "Stub Period"), Purchaser shall pay to Seller an amount
equal to 33.3 percent of the net income before taxes, goodwill
amortization and interest expense of Purchaser for such Stub
Period from the operation of the Madison, Indiana and
Carrollton, Kentucky branch offices acquired by Purchaser
pursuant to this Agreement (and any additional offices
included pursuant to subsection 2.1.2(c) below).
(c) For purposes of this Agreement, the
"Earnout Territory" means and includes the geographic
territory within a 10-mile radius of Seller's office location
in Madison, Indiana, and within a 10-mile radius of Seller's
office location in Carrollton, Kentucky. Purchaser shall be
free to open, close and relocate offices in the Earnout
Territory, and to transfer business and accounts between
offices in the Earnout Territory, without the necessity of
obtaining Seller's approval or consent to do so. With one
exception noted below, the Earnout Payment payable to Seller
shall be based on, and shall include Purchaser's operations
and income from, all offices maintained by Purchaser in the
Earnout Territory during the Earnout Period or the Stub
Period, as applicable. The exception is that if Purchaser
acquires any additional offices in the Earnout Territory by
acquiring an existing office or offices from another party,
the operations and income of those additional offices will not
be included in the calculation of the Earnout Payment payable
to Seller. Purchaser contemplates that it might close the
Carrollton, Kentucky office, in which event the business and
accounts will be transferred to the Madison, Indiana office.
(d) Purchaser may from time to time maintain
an office or offices outside the Earnout Territory that could,
logistically speaking, provide service to customer facilities
within the Earnout Territory as efficiently (or perhaps more
efficiently) than an office located in the Earnout Territory.
Conversely, an office in the Earnout Territory might
potentially be an appropriate office to provide service to a
facility outside the Earnout Territory. Purchaser agrees to
make all decisions as to which office should provide services
to a particular customer facility, whether located within or
outside the Earnout Territory, in the ordinary course of
Purchaser's day-to-day business operations based on the same
factors that Purchaser applies to such decisions generally
with respect to all of its offices. Additionally, Purchaser
agrees that it will not fill orders for employees at locations
within the Earnout Territory from offices maintained by
Purchaser outside the Earnout Territory if an office
maintained by Purchaser in the Earnout Territory has qualified
employees available to fill such orders.
(e) The Earnout Payment (and the various
components thereof) shall be determined in accordance with
generally accepted accounting principles.
Section 2.2. Seller's Right to Audit. Seller and its designated
representatives shall be entitled, at Seller's own expense and upon advance
written request at all reasonable times, to audit, examine, inspect and/or copy
Purchaser's relevant books, records and other data or information (including
computer records and data or information in electronic form) for the purpose of
confirming and/or disproving the accuracy of Purchaser's determinations as to
the amounts owed from time to time to Seller as an Earnout Payment; provided,
however, that none of such inspection and/or information need be permitted by or
provided to Seller until after the financial information for the fiscal year or
other period involved has been made public by Personnel Management, Inc. ("PMI")
in a filing with the Securities and Exchange Commission; provided, further,
Seller will treat all such information furnished to Seller acquired as a result
of such inspection by Seller as confidential and agree not to disclose same to
any other person or persons except as required by law or pursuant to court order
or as necessary in the course of any disagreement with Purchaser as to the
amount of any Earnout Payment owed to Seller.
Section 2.3. Establishing and Resolving Disagreements. The Earnout
Payment paid to Seller with respect to any fiscal year of Purchaser shall be
conclusively presumed to be the correct amount payable unless either Seller or
Purchaser, on or before the end of the next following fiscal year of Purchaser,
notifies the other party in writing of its disagreement with respect to such
amount paid (a "Notice of Disagreement"). The party providing a Notice of
Disagreement shall include therein or therewith the amount that such party
believes to be the correct amount of the Earnout Payment that should have been
paid to Seller for such fiscal year in question and copies of relevant documents
or other data or information underlying and supporting such party's calculation
of the Earnout Payment amount. Seller and Purchaser mutually agree to exchange
information and discuss the differences in their respective calculations of the
amount of the Earnout Payment in hopes that they may be able to resolve any such
disagreement as to the correct amount thereof on a mutually agreeable basis. If
any such disagreement has not been resolved by mutual agreement prior to the
expiration of sixty (60) days after the Notice of Disagreement with respect
thereto was received by the party to whom it was provided, either party shall be
entitled to request arbitration to resolve such disagreement by providing a
written request for arbitration to the other party. Any such arbitration shall
be conducted by and in accordance with the applicable rules of the American
Arbitration Association unless the parties mutually agree otherwise in writing.
Each party shall bear its own costs and expenses in connection with such
arbitration except that the fees and expenses payable to the arbitrator or
arbitrators and/or to the American Arbitration Association shall be allocated
and payable by either or both of the parties in such manner and amount as the
arbitrator or arbitrators shall determine under the circumstances considering
the positions of the parties and the outcome of the arbitration.
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, 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.
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 at a mutually agreeable location in the State of
Indiana on March 17, 1997 (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 March 17, 1997 (as previously defined, the
"Effective Time").
Section 4.2. Closing Requirements. Seller, the Garners and Purchaser 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 Kentucky) 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.
4.2.5. Seller and the Garners shall have executed and
delivered to Purchaser the Noncompetition and Confidentiality Agreement
(as hereinafter defined and in the form of Exhibit A hereto).
4.2.6. 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.
4.2.7. Seller shall have delivered to Purchaser certificates
of public officials as of a current date evidencing the corporate
existence of and compliance with all reporting requirements by Seller
in the state of its incorporation and its qualification as a foreign
corporation to conduct business in and compliance with all reporting
requirements of each other state in which Seller maintains an office or
conducts business.
4.2.8. 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
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.
ARTICLE V
Other Actions, Agreements and Covenants of the Parties
Purchaser, the Garners 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.
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 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
in order 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 in order 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; Financial Statements.
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. Promptly after Closing (or at such later date as shall be
acceptable to Purchaser if uncertainty exists as to whether Purchaser will waive
this requirement in whole or in part), Seller shall provide Purchaser with
independently audited financial statements of Seller for the years ended
December 31, 1995 and December 31, 1996, prepared in accordance with generally
accepted accounting principles consistently applied and reported on by an
independent certified public accountant employed by Seller and acceptable to
Purchaser (this requirement for audited financial statements will be waived by
Purchaser in whole or in part if Purchaser's limited partner, Personnel
Management, Inc., is not required to have audited financial statements of Seller
for its financial accounting and reporting purposes).
Section 5.5. Employment by Purchaser of Seller's Employees. Purchaser
intends to hire all of Seller's existing employees except Donald W. Garner (a
total of four employees to be hired by Purchaser) as new hires, and Seller shall
use its reasonable efforts to aid Purchaser in engaging such employees.
Purchaser agrees not to discharge any of those four employees effective during
the ninety day period following the date of this Agreement.
Section 5.6. Noncompetition and Confidentiality Agreement. As
additional consideration for Purchaser's agreement to buy the Purchased Assets,
Seller and the Garners shall each execute and deliver to Purchaser at Closing an
agreement not to compete with Purchaser for a term of five years, commencing at
the Effective Time, substantially in the form attached hereto as Exhibit A (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.
Section 5.8. COBRA and Other Compliance. Seller will honor all rights,
if any, of employees or former employees of Seller not being hired by Purchaser
to continuation under Seller's health coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"). Seller will comply in all material
respects with all laws and regulations which are applicable to Seller relating
to any of Seller's employees.
Section 5.9. Rental of Carrollton Office. The Garners hereby agree to
rent to Purchaser the office space currently rented by Seller at 131 6th Street,
Carrollton, Kentucky, on a month-to-month rental basis through May 31, 1997, at
a rent of $500 per month payable in advance on the 1st day of each month (with a
prorata rent amount being payable at the Closing for the month of March 1997).
The Garners will pay all utilities except long distance telephone charges
incurred by Purchaser, which shall be paid by Purchaser. Purchaser shall have no
responsibility for maintenance or repairs of the rented premises. Purchaser may
terminate such tenancy as of the end of any month by oral or written notice to
the Garners. The Garners and Purchaser agree to negotiate in good faith as to
the rental terms applicable after May 31, 1997, if Purchaser intends for its
occupancy to extend beyond that date.
ARTICLE VI
Representations and Warranties by Seller and the Garners
In order to induce Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereunder, Seller and the Garners make
the following representations, warranties, covenants and agreements, 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
Commonwealth of Kentucky, (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 except Indiana. Copies of Seller's Articles of
Incorporation, including all amendments thereto, certified by the Secretary of
State of Seller's state of incorporation, and Seller's 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.
Section 6.2. Subsidiaries and Affiliates. Seller has no subsidiaries and
has no investment of any kind in any other corporation, joint venture, limited
liability company, partnership or other entity.
Section 6.3. Financial Statements. Attached hereto as Schedule 6.3 are
Statements of Assets, Liabilities and Equity -- Income Tax Basis for Seller at
December 31, 1996 and at December 31, 1995 and related Statements of Revenues &
Expenses -- Income Tax Basis All Departments for Seller for each of its fiscal
years then ended (which balance sheets and income statements are herein
collectively referred to as the "Seller Financial Statements"). The Seller
Financial Statements (i) are complete, true and correct in all material
respects, (ii) have been prepared in accordance with the cash method of
accounting and sound accounting principles applied on a basis consistent with
prior periods, and (iii) present fairly the financial position of Seller at the
dates indicated and the results of operations of Seller for the periods
indicated. Whenever references are made throughout this Agreement to the Seller
Financial Statements, it will be understood that all notes and exhibits thereto
are included therein.
Section 6.4. Events Subsequent to Latest Seller Financial Statements.
Since December 31, 1996: 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;
Seller has not entered into any material transaction not in the usual and
ordinary course of its business; and 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.
Without limiting the generality of the foregoing, since December 31, 1996:
6.4.1. Seller has not done (or failed to do, as the case may
be) any of the following:
(i) sold, assigned, transferred or otherwise disposed of, 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;
(ii) waived or cancelled any rights of value or amended, modified,
altered, terminated, cancelled or allowed to expire (to the extent
renewable) any lease, contract, agreement or understanding;
(iii) made, accrued or become liable for any bonus, profit sharing or
incentive payment or, directly or indirectly, increased or granted an
increase in the rate of compensation or any benefit payable or to become
payable by Seller to its employees, except for those payments, liabilities
or increases made, incurred or payable in the ordinary course of business;
(iv) taken or permitted any act or omission constituting a breach or
default under any contract, indenture, agreement or understanding by which
Seller or its properties is or was bound;
(v) 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, 1996 and preserve Seller's physical properties,
business premises, fixtures, furniture and equipment, ordinary wear and
tear excepted;
(vi) made any material changes in the scope or nature of any of
Seller's business activities or engaged, directly or indirectly, in a
business substantially different from Seller's business on the date hereof;
(vii) made any disclosure regarding the transactions contemplated by
this Agreement without the prior approval of Purchaser;
(viii) failed to maintain in effect (a) sufficient insurance to insure
the Purchased Assets to their full insurable value, and (b) liability
insurance prudent and appropriate for entities of the size, scope and
nature of Seller's business; or
(ix) failed to duly comply in all material respects with all laws,
regulations, permits, permissions or authorizations which are applicable to
Seller or to the conduct of Seller's business.
6.4.2. Seller has conducted its business and kept its records
in a manner consistent with its practices at the time and during the
periods reflected in the Seller Financial Statements without material
change of practices, policies or procedures, including without
limitation practices in connection with the treatment of expenses,
receivables and reserves in respect thereof, and selling and purchasing
policies.
Section 6.5. Undisclosed Liabilities. Except as reflected on the Seller
Financial Statements, Seller has no 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, 1996, 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.
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 (i) no audit of any federal,
state, county or municipal returns or other tax returns filed by Seller is in
progress or 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 rents the space for Seller's office in Madison,
Indiana, from Winnie Smith, and the Garners own, and Seller rents a
portion thereof from the Garners, the property in which Seller's office
in Carrollton, Kentucky, is located. In each case Seller rents its
office space on a month-to-month oral rental agreement, the terms of
which are described on Schedule 6.7 (collectively, the "Real Estate
Leases").
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, and all of the Real Estate Leases are
assignable to Purchaser hereunder, and Seller has obtained any
necessary consents to such assignment. 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.
6.7.3. To the best of Seller's knowledge all of the buildings
and improvements on the property covered by the Real Estate Leases
comply with any federal, state and local laws, ordinances and
regulations and insurance requirements applicable to said buildings and
improvements.
Section 6.8. Personal Property - Owned. Seller has good and marketable
title to all personal property 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. The personal property
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.
Section 6.10. Use and Condition of Property; Environmental Concerns.
6.10.1. There are and have been no 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 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 facts or circumstances 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, neither the Garners nor 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
the Garners 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. Necessary Property. The Purchased Assets and the Excluded
Assets constitute all of the property necessary for the conduct of the
operations and business of Seller in the manner and to the extent conducted
during all periods reflected in the Seller Financial Statements.
Section 6.14. 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.
Section 6.15. Litigation and Claims. There is no action, suit, legal or
administrative proceeding, arbitration, investigation or other proceeding or
claim pending or, to the best 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 in effect as to Seller.
Section 6.16. Material Contracts. Except as set forth on Schedule
1.1.4, there are no material contracts, agreements, commitments, licenses,
permits, plans, instruments and binding arrangements to which Seller is subject
or by which Seller is bound, oral or written, expressed or implied, including
without limitation all agreements and instruments relating to purchase orders or
commitments, supply or requirements contracts, employment agreements, agreements
with sales agents or representatives, and franchise or license agreements. For
the purposes of this Section 6.16, "material" shall not include any contract,
agreement or commitment which (i) does not involve future commitments in excess
of $10,000 as to any single contract or $50,000 in the aggregate as to all such
contracts or (ii) may be terminated without premium or penalty on 30 days' or
less notice.
Section 6.17. Validity of Purchased Contracts. Each Purchased Contract
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 6.18. 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 6.19. Insurance. Schedule 6.19 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. Employment Matters; Employee Benefit Plans; ERISA Compliance.
6.20.1. None of the employees of Seller is employed pursuant
to a written agreement and all such employees may be terminated at
will. 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.
6.20.2. Schedule 6.20 contains a list of all current and
former employee benefit plans and practices maintained by Seller within
the past five years (whether funded or unfunded, insured or uninsured)
that provide retirement, disability, health or other benefits
(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"), along with a notation thereon of "current" as to
all such Plans currently maintained by Seller and the date of
termination thereof as to all Plans that have been terminated.
6.20.3. In connection with the administration of the Plans
(and each of them) Seller has (i) timely filed all reports and other
documents that Seller was required by ERISA to file with the Internal
Revenue Service, the United States Department of Labor or the Pension
Benefit Guaranty Corporation, (ii) timely furnished to all plan
participants and beneficiaries all reports and documents that Seller
was required by ERISA to furnish to them, and (iii) complied in all
other respects with ERISA and other applicable law and regulations.
Seller has not been notified or accused of any violation of ERISA or
other applicable law or regulation with respect to any of the Plans,
and Seller has no liability with respect to any of the Plans for any
funding deficiency, excise or other taxes, penalties, fines, interest
or other expense or damages of any kind whatsoever.
Section 6.21. Guaranties. There are no contracts or commitments by
Seller guaranteeing the payment or performance by persons or entities other than
Seller or whereby, except for the endorsement of checks in the regular and
ordinary course of its business, Seller in any way is or will be liable with
respect to obligations of any other person or entity, and no other person or
entity has guaranteed or otherwise become contingently liable with respect to
any indebtedness or obligations of Seller.
Section 6.22. Compliance with Laws; Licenses. 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. Attached hereto as
Schedule 6.22 is a list of each state in which Seller is licensed or registered
to conduct business as an employment agency, an employee leasing agency or
similar business agency, and attached to such list is a copy of each license or
registration listed.
Section 6.23. 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.
Section 6.24. 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 6.25. 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 6.26. Copies of Documents. True, correct and complete copies of
the leases, contracts and all other documents contained, listed or referred to
in this Agreement or in the Schedules to this Agreement have been delivered to
Purchaser prior to the execution of this Agreement.
Section 6.27. Shareholders. The persons listed in Schedule 6.27
constitute all of the beneficial and record holders of all of the issued and
outstanding shares of capital stock of Seller, each owning that percentage of
shares listed in Schedule 6.27 free and clear of any options, warrants,
restrictions, pledges, liens, encumbrances, claims, restrictions and security
interests.
Section 6.28. Consents of Third Parties. All necessary consents or
approvals of third parties to the transfer and assignment of the Purchased
Assets, the absence of which would adversely affect Purchaser's rights hereunder
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 6.29. 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 6.30. Customer Relations. 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 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.
ARTICLE VII
Representations and Warranties by Purchaser
In order 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 7.1. 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 Commonwealth
of Kentucky 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 7.2. 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.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification by Seller and the Garners. Seller and the
Garners each hereby 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 incurred in
connection with successfully asserting, proving and collecting indemnity
payments pursuant to this Article VIII 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:
8.1.1. Any inaccuracies in or breaches of the representations,
warranties, covenants, obligations or agreements made or to be complied
with or performed by the Garners or Seller pursuant to this Agreement
or in any agreement, schedule, certificate or instrument delivered by
or on behalf of the Garners or Seller pursuant hereto, including
without limitation the Noncompetition and Confidentiality Agreements;
8.1.2. Any and all of Seller's liabilities other than the Assumed
Liabilities;
8.1.3. 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; and
8.1.4. 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.
Section 8.2. Indemnification by Purchaser. Purchaser shall indemnify
Seller 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 incurred in connection with successfully asserting, proving
and collecting indemnity payments pursuant to this Article VIII 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:
8.2.1. 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;
8.2.2. Any failure of Purchaser to pay, discharge or perform the
Assumed Liabilities;
8.2.3. 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 8.1; and
8.2.4. 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 8.3. Survival of Covenants, Representations and Warranties.
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 indefinitely, regardless
of any investigation made by or on behalf of any party hereto.
Section 8.4. Payment and Settlement of Amounts Due.
8.4.1. Any amount due to Purchaser from Seller and/or the
Garners pursuant to any of the provisions of this Article VIII shall be
paid to Purchaser by Seller and/or the Garners 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 2.1.
8.4.2. Any amount due to Seller from Purchaser pursuant to any
of the provisions of this Article VIII shall be paid to Seller by
Purchaser within 10 days of demand therefor.
8.4.3. Any amounts not paid when due pursuant to the
provisions of this Section 8.4 shall bear interest from the date of
demand at the rate of 15 percent per annum.
ARTICLE IX
Change of Names; Use of Names by Purchaser
If requested to do so by Purchaser at any time after the Closing,
Seller shall change its current corporate name to a name other than, and not
similar to, its current name and shall file appropriate documents reflecting
such name change in Kentucky and in each state where qualified to do business as
a foreign corporation. Seller shall coordinate any such name change and the
filings in connection therewith with Purchaser and its counsel in order 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 current corporate name of
Seller 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, including, without limitation, the name Garner-Scott
Temporaries, 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 X
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. Unless waived by Purchaser pursuant to Section
5.4, Seller shall pay any and all costs, fees and expenses of independent
auditors in connection with the preparation of audited financial statements of
Seller for the years ended December 31, 1995 and December 31, 1996.
ARTICLE XI
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.
ARTICLE XII
Miscellaneous
Section 12.1. 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 12.2. 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 12.3. 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 12.4. 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, Don R. Taylor, President
addressed to: PMI Administration, Inc.
1499 Windhorst Way, Suite 100
Greenwood, IN 46143
With a copy to: David B. Millard, Esq.
Leagre & Barnes
9100 Keystone Crossing, Suite 800
Indianapolis, IN 46240
If to Seller or the Garners, Garner Scott Enterprise, Inc.
addressed to: and/or Donald W. Garner and/or Shirley A.
Garner
1759 Carlisle Road
Carrollton, Kentucky 41008
With a copy to: G. Edward James, Esq.
Crawford, Baxter & Jaines, P.S.C.
523 Highland Avenue
P.O. Box 353
Carrollton, Kentucky 41008
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 12.5. 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 12.6. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Indiana.
Section 12.7. Consent to Jurisdiction. Each party hereto hereby
irrevocably:
12.7.1. consents to any suit, action or proceeding with
respect to this Agreement being brought in the Circuit or Superior
Court of the State of Indiana in Johnson County and in the United
States District Court for the Southern District of Indiana;
12.7.2. waives to the fullest extent permitted by the law
governing this Agreement any objection that it might have now or
hereafter to the laying of the venue of any such suit, action or
proceeding under Section 12.7.1 above in any such court and any claim
that any such suit, action or proceeding under Section 12.7.1 above has
been brought in an inconvenient forum;
12.7.3. acknowledges the competence of any such court, submits
to the jurisdiction of any such court in any such suit, action or
proceeding and agrees that the final judgment in any such suit, action
or proceeding brought in such court shall be conclusive and binding
upon such party and may be enforced in the courts of the jurisdiction
in which such party's principal office or principal residence is
located, subject to any provision of the law of such jurisdiction of
general applicability relating to enforcement proceedings, or in any of
the courts specified in Section 12.7.1, a certified or exemplified copy
of which shall be conclusive evidence of the fact and of the amount of
such party's obligation; provided, that service of process is effected
upon such party in the manner specified below or as otherwise permitted
by law; and
12.7.4. to the extent that such party has or hereafter may
acquire any immunity from jurisdiction of any such court or from any
legal process therein, waives such immunity, to the fullest extent
permitted by law, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any
claim that (i) such party is not personally subject to the jurisdiction
of the above-named courts, (ii) such party is immune from any legal
process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with
respect to such party or the property of such party or (iii) this
Agreement or the subject matter hereof may not be enforced in or by
such courts.
Section 12.8. 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.
Section 12.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original.
Section 12.10. 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.
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 I, an Indiana Limited Partnership
By: PMI ADMINISTRATION, INC.,
its General Partner
By /s/ Don R. Taylor
Don R. Taylor, President
"PURCHASER"
GARNER SCOTT ENTERPRISE, INC., a Kentucky
corporation
By /s/ Donald W. Garner
Donald W. Garner, President
"SELLER"
/s/ Donald W. Garner
Donald W. Garner, Individually
"DONALD"
/s/ Shirley A. Garner
Shirley A. Garner, Individually
"SHIRLEY"
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF ________)
Before me, a Notary Public in and for said County and State, on the _____
day of March, 1997, personally appeared Don R. Taylor, the President of PMI
Administration, Inc., sole General Partner of PMI LP I, who acknowledged the
execution of the above and foregoing Asset Purchase Agreement for and on behalf
of such corporation in its capacity as such General Partner.
WITNESS my hand and Notarial Seal.
----------------------------------
NOTARY PUBLIC, a Resident of
____________County, Indiana
------------------------------------
My Commission Expires: Name Printed
- -------------------------
STATE OF INDIANA )
) SS:
COUNTY OF JEFFERSON )
Before me, a Notary Public in and for said County and State, on the _____
day of March, 1997, personally appeared Donald W. Garner, the President of
Garner Scott Enterprise, 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.
------------------------------------
NOTARY PUBLIC, a Resident of
___________ County, Indiana
------------------------------------
My Commission Expires: Name Printed
- -------------------------
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF JEFFERSON )
Before me, a Notary Public in and for said County and State, on the_____
day of March, 1997, personally appeared Donald W. Garner, 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.
------------------------------------
NOTARY PUBLIC, a Resident of
___________ County, Indiana
------------------------------------
My Commission Expires: Name Printed
- -------------------------
STATE OF INDIANA )
) SS:
COUNTY OF JEFFERSON )
Before me, a Notary Public in and for said County and State, on the_____
day of March, 1997, personally appeared Shirley W. Garner, who acknowledged the
execution of the above and foregoing Asset Purchase Agreement to be her
voluntary act and deed.
WITNESS my hand and Notarial Seal.
------------------------------------
NOTARY PUBLIC, a Resident of
___________ County, Indiana
------------------------------------
My Commission Expires: Name Printed
- -------------------------
<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 6.20 Employee Benefit Plans
Schedule 6.22 Licenses
Schedule 6.27 Shareholders
Schedule 6.7.1 Real Property -- Leased
Schedule 6.19 Insurance
<PAGE>
LIST OF EXHIBITS TO
ASSET PURCHASE AGREEMENT
Exhibit A -- Form of Noncompetition and Confidentiality Agreement (Section 5.6)
EXHIBIT 10.59
----------------------------------------------------
ASSET PURCHASE AGREEMENT
Dated March 24, 1997,
among and between
PMI LP I,
FIRST IN TEMPORARIES, INC.,
and
FRANK L. HARTMAN
----------------------------------------------------
<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
Section 2.1 Purchase Price 3
Section 2.2 Payment of Purchase Price 3
ARTICLE III. Assumption of Liabilities 3
Section 3.1. Assumed Liabilities 3
Section 3.2. Excluded Liabilities 3
ARTICLE IV. Closing and Effective Time 3
Section 4.1. Closing; Closing Date; Effective Time 3
Section 4.2. Closing Requirements 3
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 5
Section 5.3. Post-Closing Cooperation of Seller 5
Section 5.4. Execution of Further Documents; Financial Statements 5
Section 5.5. Employment by Purchaser of Seller's Employees 6
Section 5.6. Noncompetition and Confidentiality Agreements 6
Section 5.7. Allocation of Purchase Price 6
Section 5.8. COBRA and Other Compliance 6
ARTICLE VI. Representations and Warranties by Seller and Hartman 6
Section 6.1. Corporate Existence and Qualification 6
Section 6.2. Subsidiaries and Affiliates 7
Section 6.3. Financial Statements 7
Section 6.4. Events Subsequent to December 31, 1996 7
Section 6.5. Undisclosed Expenses or Liabilities 8
Section 6.6. Tax Returns 9
Section 6.7. Leased Office Space 9
Section 6.8. Environmental Matters 9
Section 6.9. Personal Property - Owned 9
Section 6.10. Personal Property - Leased 9
Section 6.11. Restrictive Covenants 9
Section 6.12. Intellectual Property Rights 10
Section 6.13. Necessary Property 10
Section 6.14. No Breach, Default or Violation 10
Section 6.15. Litigation and Claims 10
Section 6.16. Material Contracts 10
Section 6.17. Validity of Purchased Contracts 10
Section 6.18. Powers of Attorney 10
Section 6.19. Insurance 11
Section 6.20. Employment Matters; Employee Benefit Plans; ERISA
Compliance 11
Section 6.21. Guaranties 12
Section 6.22. Compliance With Laws; Licenses 12
Section 6.23. Authorization of Agreement 12
Section 6.24. All Material Information 12
Section 6.25. Material Adverse Contract 13
Section 6.26. Copies of Documents 13
Section 6.27. Shareholders 13
Section 6.28. Consents of Third Parties 13
Section 6.29. Other Approvals 13
Section 6.30. Customer Relations 13
ARTICLE VII. Representations and Warranties by Purchaser 14
Section 7.1. Valid Existence and Qualification of Purchaser 14
Section 7.2. Authorization of Agreement by Purchaser 14
ARTICLE VIII. Indemnification 14
Section 8.1. Indemnification by Seller and Hartman 14
Section 8.2. Indemnification by Purchaser 15
Section 8.3. Survival of Covenants, Representations and Warranties 15
Section 8.4. Payment and Settlement of Amounts Due 16
ARTICLE IX. Use of Names by Purchaser 16
ARTICLE X. Expenses of the Parties 16
ARTICLE XI. Brokers' Commission 17
ARTICLE XII. Miscellaneous 17
Section 12.1. Waivers and Amendments 17
Section 12.2. Entire Agreement 17
Section 12.3. Headings 17
Section 12.4. Notices 17
Section 12.5. Severability 18
Section 12.6. Governing Law 18
Section 12.7. Consent to Jurisdiction 18
Section 12.8. Third Parties 19
Section 12.9. Counterparts 19
Section 12.10. Successors and Assigns 19
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 24th day of March, 1997, effective as of 12:01 a.m. on March 24,
1997 (the "Effective Time"), among and between FIRST IN TEMPORARIES, INC., a
Florida corporation ("Seller"), FRANK L. HARTMAN, a Florida resident
("Hartman"), and PMI LP I, an Indiana limited partnership ("Purchaser").
PRELIMINARY STATEMENT
Seller conducts an employment staffing and placement business from an
office at 173 Sears Avenue, Suite 281, Louisville, Kentucky 40207. (Seller also
conducts similar businesses at other locations in other states, none of which
are included in the transaction contemplated by this Agreement.) Seller desires
to sell to Purchaser, and Purchaser desires to purchase from Seller,
substantially all of the non-cash assets owned by Seller and held or used by
Seller in connection with the operation of such business conducted by Seller at
its Louisville office, subject to and on the terms and conditions herein set
forth. Hartman is the sole shareholder of Seller.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and 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 and that are held or used by Seller in connection with
the operation of Seller's staffing and placement business conducted at or
through Seller's office at 173 Sears Avenue, Suite 281, Louisville, Kentucky
40207 (the "Business") 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 of the Business 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;
1.1.4. all of Seller's rights under all leases (including an $825
damage deposit under the Lease described on Schedule 1.1.4), 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 (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 registrations, permits, licenses, consents, approvals and
qualifications of Federal, State, local or other government agencies
relating to the Business or the Purchased Assets;
1.1.8. 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;
1.1.9. the goodwill relating to the 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. all accounts receivable of Seller for work performed prior to
the Effective Time;
1.2.3. all notes receivable of Seller at the Effective Time; and
1.2.4. Seller's assets not held or used by Seller in connection with
Seller's operation of the Business, including, without limitation, Seller's
assets held or used by Seller exclusively in connection with the operation
of other offices by Seller (other than the office in Louisville, Kentucky).
ARTICLE II
Purchase Price
Section 2.1. Purchase Price. The total purchase price for the Purchased
Assets (the "Purchase Price") is the sum of Three Hundred Eleven Thousand
Dollars ($311,000).
Section 2.2. Payment of Purchase Price. Purchaser shall pay the Purchase
Price in full to Seller at Closing by check.
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, Seller's liabilities and obligations accruing or attributable to
events occurring after the Effective Time under (i) those Purchased Contracts,
if any, listed on Schedule 1.1.4, and (ii) any other Purchased Contracts to the
extent (but only to the extent) expressly assumed by Purchaser in writing.
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 to consummate the transactions
contemplated hereby (the "Closing") shall take place on March 24, 1997 (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, Indiana
time) on March 24, 1997 (as previously defined, the "Effective Time").
Section 4.2. Closing Requirements. Seller, Hartman and Purchaser 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 and to assign to Purchaser
such leases with respect to real property and other Purchased Contracts
as are being assumed by Purchaser in connection herewith, together with
all necessary consents of third parties applicable thereto, subject in
each case 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 Florida) 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.
4.2.5. Seller and Hartman shall have executed and delivered to
Purchaser the Noncompetition and Confidentiality Agreement (as
hereinafter defined and in the form of Exhibit A hereto).
4.2.6. Seller shall have delivered to Purchaser a certificate
of the Secretary or other appropriate office of Seller dated the
Closing Date certifying as to the incumbency of officers and Directors
of Seller, the accuracy and completeness of the Articles of
Incorporation and Bylaws of Seller, the continuing effectiveness of
Seller's authorizing resolutions, and such additional matters as are
customary for similar transactions and as Purchaser shall reasonably
request.
4.2.7. Seller shall have delivered to Purchaser certificates
of public officials as of a current date evidencing (a) the corporate
existence of and compliance with all reporting requirements by Seller
in the State of Florida, and (b) Seller's authorization to do business
and good standing as a foreign corporation in the Commonwealth of
Kentucky.
4.2.8. 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
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.
4.2.9. Purchaser shall pay the Purchase Price to Seller.
4.2.10. Seller and Purchaser shall mutually execute and
deliver such other agreements, instruments, certificates or other
documents as shall be reasonably required or requested to effect the
transactions contemplated hereby.
ARTICLE V
Other Actions, Agreements and Covenants of the Parties
Purchaser, Hartman 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.
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 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. Post-Closing Cooperation of Seller. Seller agrees that after
the Effective Time Seller will cooperate with Purchaser, to the extent
reasonably requested by Purchaser, and at Purchaser's expense, to enable
Purchaser by mutual agreement of Seller and Purchaser (i) to institute and
prosecute all proceedings which Purchaser may deem proper in order 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 in order 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. 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; Financial Statements. 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.
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
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. For a period of five years from and
after the Effective Time, neither Seller nor Hartman shall, directly or
indirectly, solicit the employment of any person presently employed by Seller
who becomes employed by Purchaser.
Section 5.6. Noncompetition and Confidentiality Agreement. As additional
consideration for Purchaser's agreement to buy the Purchased Assets, Seller and
Hartman 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 A (the
"Noncompetition and Confidentiality Agreement").
Section 5.7. Allocation of Purchase Price. 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 to the
Internal Revenue Service.
Section 5.8. COBRA and Other Compliance. Seller will honor all rights, if
any, of employees or former employees of Seller to continuation under Seller's
health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). Seller will comply in all material respects with all laws and
regulations which are applicable to Seller relating to any of Seller's
employees.
ARTICLE VI
Representations and Warranties by Seller and Hartman
In order to induce Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereunder, Seller and Hartman make the following
representations, warranties, covenants and agreements, 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
Florida, (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 qualified to transact business as a foreign corporation in the Commonwealth
of Kentucky and in any other jurisdictions where failure to so qualify would
have a materially adverse effect on Seller's business. Copies of Seller's
Articles of Incorporation and Bylaws, including all amendments thereto, have
been delivered to Purchaser and such copies are true, complete and correct in
every particular.
Section 6.2. Subsidiaries and Affiliates. Seller has no subsidiaries and
has no investment of any kind in any other corporation, joint venture, limited
liability company, partnership or other entity.
Section 6.3. Financial Statements. Attached hereto as Schedule 6.3 is an
Income Statement of Seller with respect to the Business for the year ended
December 31, 1996 (the "Seller Financial Statements"). The Seller Financial
Statements (i) are complete, true and correct in all material respects, (ii)
have been prepared on an accrual basis with prior periods, and (iii) present
fairly the results of operations of the Business by Seller for the period
indicated.
Section 6.4. Events Subsequent to December 31, 1996. Since December 31,
1995, there have been no adverse changes in the condition of the assets,
liabilities, business, operations, prospects or properties of the Business, or
in the financial condition or earnings of the Business as shown in the Seller
Financial Statements, other than changes in the ordinary course of the operation
of the Business which, individually or in the aggregate, are not material,
Seller has not entered into any material transaction not in the usual and
ordinary course of the operation of the Business, and the Business 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. Without limiting the generality of the foregoing, since December
31, 1995:
6.4.1. Seller has not done (or failed to do, as the case may be) any
of the following in respect of the Business:
(i) sold, assigned, transferred or otherwise disposed of, 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;
(ii) waived or cancelled any rights of value or amended,
modified, altered, terminated, cancelled or allowed to expire (to the
extent renewable) any lease, contract, agreement or understanding;
(iii) made, accrued or become liable for any bonus, profit
sharing or incentive payment or, directly or indirectly, increased or
granted an increase in the rate of compensation or any benefit payable
or to become payable by Seller to its employees, except for those
payments, liabilities or increases made, incurred or payable in the
ordinary course of business;
(iv) taken or permitted any act or omission constituting a breach
or default under any contract, indenture, agreement or understanding
by which Seller or its properties is or was bound;
(v) 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, 1995 and preserve Seller's physical properties, business
premises, fixtures, furniture and equipment, ordinary wear and tear
excepted;
(vi) made any material changes in the scope or nature of any of
Seller's business activities or engaged, directly or indirectly, in a
business substantially different from Seller's business on the date
hereof;
(vii) made any disclosure regarding the transactions contemplated
by this Agreement without the prior approval of Purchaser;
(viii) failed to maintain in effect (a) sufficient insurance to
insure the Purchased Assets to their full insurable value, and (b)
liability insurance prudent and appropriate for entities of the size,
scope and nature of Seller's business; or
(ix) failed to duly comply in all material respects with all
laws, regulations, permits, permissions or authorizations which are
applicable to Seller or to the conduct of Seller's business.
6.4.2. Seller has conducted the Business and kept its records in a
manner consistent with its practices at the time and during the periods
reflected in the Seller Financial Statements without material change of
practices, policies or procedures, including without limitation practices
in connection with the treatment of expenses, receivables and reserves in
respect thereof, and selling and purchasing policies.
Section 6.5. Undisclosed Expenses or Liabilities. There are no expenses,
nor are there any absolute or contingent liabilities or obligations of Seller
which if paid by Seller would have been reported as expenses, with respect to
Seller's conduct of the Business during the period covered by the Seller
Financial Statements except those expenses reflected on the Seller Financial
Statements.
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 (i) no audit of any federal,
state, county or municipal returns or other tax returns filed by Seller is in
progress or pending or threatened, (ii) there are no unpaid taxes, penalties or
interest which are or may 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.
Section 6.7. Leased Office Space. Seller leases its office space at 173
Sears Avenue, Suite 281, Louisville, Kentucky (the "Leased Premises"), from
Miraflores Center ("Landlord") pursuant to a Lease between Seller and Landlord
dated August 1, 1996 (the "Lease"), a complete and accurate copy of which has
been provided by Seller to Purchaser and the remaining term of which (excluding
option periods) expires August 1, 1997. Neither Seller nor, to Seller's
knowledge, Landlord is in default under or in violation of any term of the
Lease. Seller has no knowledge of any violations or alleged violations by Seller
or Landlord of any applicable law, regulation, code, ordinance or other
applicable requirement of any governmental authority having jurisdiction thereof
(including, without limitation, building codes and environmental laws or
requirements) with respect to the condition of the Leased Premises or the use
thereof by Seller.
Section 6.8. Environmental Matters. Seller has no knowledge or notice of
any contamination or pollution of the Leased Premises or the improvements and/or
real estate in or upon which the Leased Premises is located by any materials
that are known to Seller or Hartman to be regulated or classified as "hazardous"
(or the like) substances by any applicable environmental law or regulation.
Section 6.9. Personal Property - Owned. Seller has good and marketable
title to all of the Purchased Assets, free and clear of all mortgages, liens,
security interests, charges, claims, restrictions and other encumbrances of
every kind.
Section 6.10. Personal Property - Leased. Seller has disclosed in Schedule
1.1.4 all leases under which Seller leases personal property utilized in the
Business 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 has obtained all necessary consents to such
assignment.
Section 6.11. Restrictive Covenants. Except for the Noncompetition and
Confidentiality Agreement, neither Hartman nor Seller is subject to any
agreements not to compete or similar restrictive covenants that restrict or
limit their activities within the Commonwealth of Kentucky.
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 developed by Hartman 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. Necessary Property. Except for the Excluded Assets listed in
Sections 1.2.1, 1.2.2 and 1.2.3, the Purchased Assets constitute all of the
property utilized by Seller in conducting the Business in the manner and to the
extent conducted during all periods reflected in the Seller Financial
Statements.
Section 6.14. 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 the Business or the condition, financial or otherwise, of the Business
or the Purchased Assets.
Section 6.15. 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 or the Business, 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 or the Business.
Section 6.16. Material Contracts. Except as set forth on Schedule 1.1.4,
there are no material contracts, agreements, commitments, licenses, permits,
plans, instruments and binding arrangements to which the Business is subject or
by which Seller is bound, oral or written, expressed or implied, including
without limitation all agreements and instruments relating to purchase orders or
commitments, supply or requirements contracts, employment agreements, agreements
with sales agents or representatives, and franchise or license agreements. For
the purposes of this Section 6.16, "material" shall not include any contract,
agreement or commitment which may be terminated without premium or penalty on 30
days' or less notice.
Section 6.17. Validity of Purchased Contracts. Each Purchased Contract may
be assigned to Purchaser without any restriction, required consent or other
approval (except for such consents or approvals that Seller has obtained), and
each Purchased Contract is in full force and effect and constitutes the valid,
legal and binding obligations of Seller and the other parties thereto.
Section 6.18. Powers of Attorney. There are no outstanding powers of
attorney granted by Seller with respect to the Business or the operations
thereof or the Purchased Assets.
Section 6.19. Insurance. Schedule 6.19 is a true, correct and complete list
of all fire, theft, casualty, liability and other insurance policies insuring
the Business and all insurance policies maintained for any of the employees of
the Business, 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. Employment Matters; Employee Benefit Plans; ERISA Compliance.
6.20.1. None of the employees of Seller in respect of the Business is
employed pursuant to a written agreement and all such employees may be
terminated at will. The hours worked by, payments made to and the working
conditions of the employees of Seller in respect of the Business 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 the Business 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 in
respect of the Business.
6.20.2. Schedule 6.20 contains a list of all current and former
employee benefit plans and practices maintained by Seller in respect of the
Business within the past five years (whether funded or unfunded, insured or
uninsured) that provide retirement, disability, health or other benefits
(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"), along with a
notation thereon of "current" as to all such Plans currently maintained by
Seller and the date of termination thereof as to all Plans that have been
terminated.
6.20.3. In connection with the administration of the Plans (and each
of them) Seller has (i) timely filed all reports and other documents that
Seller was required by ERISA to file with the Internal Revenue Service, the
United States Department of Labor or the Pension Benefit Guaranty
Corporation, (ii) timely furnished to all plan participants and
beneficiaries all reports and documents that Seller was required by ERISA
to furnish to them, and (iii) complied in all other respects with ERISA and
other applicable law and regulations. Seller has not been notified or
accused of any violation of ERISA or other applicable law or regulation
with respect to any of the Plans, and Seller has no liability with respect
to any of the Plans for any funding deficiency, excise or other taxes,
penalties, fines, interest or other expense or damages of any kind
whatsoever.
Section 6.21. Guaranties. There are no contracts or commitments by Seller
guaranteeing the payment or performance by persons or entities other than Seller
or whereby, except for the endorsement of checks in the regular and ordinary
course of its business, Seller in any way is or will be liable with respect to
obligations of any other person or entity, and no other person or entity has
guaranteed or otherwise become contingently liable with respect to any
indebtedness or obligations of Seller.
Section 6.22. Compliance with Laws; Licenses. The Business and the
operations thereof 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 6.22.
Section 6.23. 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.
Section 6.24. All Material Information. No representation or warranty made
by Seller in this Agreement, in any Schedule delivered pursuant to this
Agreement, or in any other agreement, instrument, certificate or other document
executed or provided by Seller pursuant to this Agreement or in connection with
the transaction contemplated hereby (or any statement made to Purchaser by or on
behalf of Seller in connection with the transactions contemplated by this
Agreement), contains in any such case 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, the operations, prospects, property, assets or financial condition
of the Business or the Purchased Assets.
Section 6.25. 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 6.26. Copies of Documents. True, correct and complete copies of the
leases, contracts and all other documents contained, listed or referred to in
this Agreement or in the Schedules to this Agreement have been delivered to
Purchaser prior to the execution of this Agreement.
Section 6.27. Shareholders. The persons listed in Schedule 6.27 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 or percentage of
shares listed in Schedule 6.27 free and clear of any options, warrants,
restrictions, pledges, liens, encumbrances, claims, restrictions and security
interests.
Section 6.28. Consents of Third Parties. Other than the consent of the
Landlord to the assignment of the Lease, Seller has no knowledge that there are
any necessary consents or approvals of third parties to the transfer and
assignment of the Purchased Assets, the absence of which would adversely affect
Purchaser's rights hereunder or its utilization of the Purchased Assets or the
conduct of the Business.
Section 6.29. 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 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 6.30. Customer Relations. Seller has no actual knowledge that any
person or organization that has been a material customer of the Business 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 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 the Business will not, or likely will not, be a material
customer of Purchaser during the twelve month period following the Effective
Time.
ARTICLE VII
Representations and Warranties by Purchaser
In order 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 7.1. 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 authorized to transact business in the Commonwealth
of Kentucky 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 7.2. 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.
ARTICLE VIII
Indemnification
Section 8.1. Indemnification by Seller and Hartman. Seller and Hartman
hereby 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 incurred in
connection with successfully asserting, proving and collecting indemnity
payments pursuant to this Article VIII 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:
8.1.1. Any inaccuracies in or breaches of the representations,
warranties, covenants, obligations or agreements made or to be complied
with or performed by Hartman or Seller in, under or pursuant to this
Agreement or any agreement, schedule, certificate or instrument delivered
by or on behalf of Hartman or Seller pursuant hereto or in connection with
the transactions contemplated hereby, including without limitation the
Noncompetition and Confidentiality Agreement;
8.1.2. Any and all of Seller's liabilities other than the Assumed
Liabilities;
8.1.3. 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; and
8.1.4. 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.
Section 8.2. Indemnification by Purchaser. Purchaser shall indemnify Seller
and Hartman 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 VIII 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:
8.2.1. 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;
8.2.2. Any failure of Purchaser to pay, discharge or perform the
Assumed Liabilities;
8.2.3. Any liabilities 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 8.1; and
8.2.4. 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 8.3. Survival of Covenants, Representations and Warranties. 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 indefinitely, regardless
of any investigation made by or on behalf of any party hereto.
Section 8.4. Payment and Settlement of Amounts Due.
8.4.1. Any amount due to Purchaser from Seller and/or Hartman pursuant
to any of the provisions of this Article VIII shall be paid to Purchaser by
Seller and/or Hartman within 10 days of demand therefor.
8.4.2. Any amount due to Seller and/or Hartman from Purchaser pursuant
to any of the provisions of this Article VIII shall be paid to Seller
and/or Hartman by Purchaser within 10 days of demand therefor.
8.4.3. Any amounts not paid when due pursuant to the provisions of
this Section 8.4 shall bear interest from the date of demand at the rate of
15 percent per annum.
ARTICLE IX
Use of Names by Purchaser
From and after the Effective Time Purchaser shall have full right, power
and authority to the use for a period of up to 180 days in the Commonwealth of
Kentucky, and Seller hereby consents to such use therein by Purchaser or
Purchaser's designee, of the name "First In Temporaries, Inc.," and any
abbreviations or combinations or derivatives thereof, without restriction or
adverse claim of or use thereof by Seller, any of its affiliates, or any person
claiming by, through or under Seller. For a period of three years following the
Effective Time Seller shall not use such name, or authorize the use of such name
by any other party (other than Purchaser), in the city limits of Louisville,
Kentucky (as constituted the date hereof) or within a 30-mile radius of the
office location from which Seller has conducted the Business, without in any
such case first obtaining Purchaser's written consent. The foregoing is not
intended and shall not be construed as granting any license or other rights to
use or ownership of the name "First in Temporaries" or any other tradenames,
trademarks, service marks or trade dress, and Purchaser covenants that it shall
at no time in any manner claim any rights in any such proprietary property. All
use of the name First in Temporaries shall be only in connection with the
temporary services business being purchased under this Agreement and all uses
are subject to the reasonable approval of Seller.
ARTICLE X
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 XI
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.
ARTICLE XII
Miscellaneous
Section 12.1. 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 12.2. 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 pursuant hereto or
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 12.3. 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 12.4. 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, Don R. Taylor, President
addressed to: PMI Administration, Inc.
1499 Windhorst Way, Suite 100
Greenwood, IN 46143
With a copy to: David B. Millard, Esq.
Leagre & Barnes
9100 Keystone Crossing
Suite 800
Indianapolis, IN 46240
If to Seller or Hartman, First In Temporaries or Frank L. Hartman
addressed to: 14310 North Dale Mabry Highway, Suite 380
Tampa, Florida 33618
With a copy to: Robert Reid Haney
Kalish & Ward, P.A.
101 East Kennedy Boulevard
P.O. Box 71
Tampa, Florida 33601-0071
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 12.5. 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 12.6. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Indiana.
Section 12.7. Consent to Jurisdiction. Each party hereto hereby
irrevocably:
12.7.1. consents to any suit, action or proceeding with
respect to this Agreement being brought in the Circuit or Superior
Court of the State of Indiana in Johnson County and in the United
States District Court for the Southern District of Indiana;
12.7.2. waives to the fullest extent permitted by the law
governing this Agreement any objection that it might have now or
hereafter to the laying of the venue of any such suit, action or
proceeding under Section 12.7.1 above in any such court and any claim
that any such suit, action or proceeding under Section 12.7.1 above has
been brought in an inconvenient forum;
12.7.3. acknowledges the competence of any such court, submits
to the jurisdiction of any such court in any such suit, action or
proceeding and agrees that the final judgment in any such suit, action
or proceeding brought in such court shall be conclusive and binding
upon such party and may be enforced in the courts of the jurisdiction
in which such party's principal office or principal residence is
located, subject to any provision of the law of such jurisdiction of
general applicability relating to enforcement proceedings, or in any of
the courts specified in Section 12.7.1, a certified or exemplified copy
of which shall be conclusive evidence of the fact and of the amount of
such party's obligation; provided, that service of process is effected
upon such party in the manner specified below or as otherwise permitted
by law; and
12.7.4. to the extent that such party has or hereafter may
acquire any immunity from jurisdiction of any such court or from any
legal process therein, waives such immunity, to the fullest extent
permitted by law, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any
claim that (i) such party is not personally subject to the jurisdiction
of the above-named courts, (ii) such party is immune from any legal
process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with
respect to such party or the property of such party or (iii) this
Agreement or the subject matter hereof may not be enforced in or by
such courts.
Section 12.8. 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.
Section 12.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original.
Section 12.10. 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.
<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 I, an Indiana Limited Partnership
By: PMI ADMINISTRATION, INC., an Indiana
corporation, its General Partner
By /s/ Don R. Taylor
Don R. Taylor, President
"PURCHASER"
FIRST IN TEMPORARIES, INC.
By /s/ Frank L. Hartman
Frank L. Hartman, President
"SELLER"
/s/ Frank L. Hartman
Frank L. Hartman, Individually
"HARTMAN"
<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 6.19 Insurance
Schedule 6.20 Employee Benefit Plans
Schedule 6.22 Licenses
Schedule 6.27 Shareholders
<PAGE>
LIST OF EXHIBITS TO
ASSET PURCHASE AGREEMENT
Exhibit A -- Form of Noncompetition and Confidentiality Agreement
(Section 5.6)
EXHIBIT 10.60
WAIVER
THIS WAIVER (this "Waiver") is made and entered into the 17th day of
February, 1997, by and between PERSONNEL MANAGEMENT, INC., an Indiana
corporation (the "Corporation"), and DON R. TAYLOR (the "Executive").
WITNESSETH:
WHEREAS, Heartland Group, Inc., a Maryland corporation, and Heartland
Advisors, Inc., a Wisconsin corporation, (together "Heartland") beneficially
owns (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) certain shares of the outstanding common stock of the
Corporation; and
WHEREAS, Heartland wishes to acquire additional shares of the
outstanding common stock of the Corporation as a result of which Heartland may
become the beneficial owner of securities of the Corporation representing 20
percent or more of the combined voting power of the Corporation's outstanding
voting securities entitled to vote generally in the election of Directors (a "20
Percent Owner"); and
WHEREAS, the Corporation and the Executive believe it is in their best
interests for Heartland to acquire additional shares not exceeding certain
levels; and
WHEREAS, the Executive and the Corporation have entered into a Change
of Control Severance Benefits Agreement (the "Agreement") dated November 8,
1995; and
WHEREAS, Heartland becoming a 20 Percent Owner would constitute a
"Change of Control of the Corporation" as that term is defined in the Agreement;
and
WHEREAS, to avoid discouraging Heartland from acquiring additional
shares, the Executive and the Corporation wish to enter into this Waiver;
NOW, THEREFORE, in consideration of the foregoing, the promises
contained herein and other valuable consideration, it is hereby agreed by and
between the parties as follows:
1. For purposes of the Agreement and any other document that references the
Agreement, the Executive hereby waives and relinquishes any right to claim or
assert that Heartland's becoming a 20 Percent Owner, whether as the result of
its acquisition of additional shares or otherwise, constitutes a "Change of
Control of the Corporation" as that term is defined in the Agreement; provided,
however, that the foregoing waiver and relinquishment shall not apply to any
acquisition of additional shares (or the direct or indirect beneficial ownership
of securities of the Corporation by Heartland that results therefrom) that
results in Heartland or any "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) that includes
Heartland becoming the "beneficial owner" (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30 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.
2. The Corporation represents that this Waiver has been approved by the
Board of Directors of the Corporation or an authorized committee thereof and
that the President of the Corporation, Don R. Taylor, is authorized to execute
and deliver this Waiver on behalf of the Corporation.
3. All of the terms and provisions of this Waiver shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs, executors,
administrators, legal representatives, successors and assigns of the parties
hereto.
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, President
ATTEST:
/s/ Elizabeth McFarland
Elizabeth McFarland
Vice-President - Operations
"EXECUTIVE"
/s/ Don R. Taylor
Don R. Taylor
EXHIBIT 10.61
WAIVER
THIS WAIVER (this "Waiver") is made and entered into the 17th day of
February, 1997, by and between PERSONNEL MANAGEMENT, INC., an Indiana
corporation (the "Corporation"), and GARY F. HENTSCHEL (the "Executive").
WITNESSETH:
WHEREAS, Heartland Group, Inc., a Maryland corporation, and Heartland
Advisors, Inc., a Wisconsin corporation, (together "Heartland") beneficially
owns (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) certain shares of the outstanding common stock of the
Corporation; and
WHEREAS, Heartland wishes to acquire additional shares of the
outstanding common stock of the Corporation as a result of which Heartland may
become the beneficial owner of securities of the Corporation representing 20
percent or more of the combined voting power of the Corporation's outstanding
voting securities entitled to vote generally in the election of Directors (a "20
Percent Owner"); and
WHEREAS, the Corporation and the Executive believe it is in their best
interests for Heartland to acquire additional shares not exceeding certain
levels; and
WHEREAS, the Executive and the Corporation have entered into a Change
of Control Severance Benefits Agreement (the "Agreement") dated July 15, 1996;
and
WHEREAS, Heartland becoming a 20 Percent Owner would constitute a
"Change of Control of the Corporation" as that term is defined in the Agreement;
and
WHEREAS, to avoid discouraging Heartland from acquiring additional
shares, the Executive and the Corporation wish to enter into this Waiver;
NOW, THEREFORE, in consideration of the foregoing, the promises
contained herein and other valuable consideration, it is hereby agreed by and
between the parties as follows:
1. For purposes of the Agreement and any other document that references the
Agreement, the Executive hereby waives and relinquishes any right to claim or
assert that Heartland's becoming a 20 Percent Owner, whether as the result of
its acquisition of additional shares or otherwise, constitutes a "Change of
Control of the Corporation" as that term is defined in the Agreement; provided,
however, that the foregoing waiver and relinquishment shall not apply to any
acquisition of additional shares (or the direct or indirect beneficial ownership
of securities of the Corporation by Heartland that results therefrom) that
results in Heartland or any "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) that includes
Heartland becoming the "beneficial owner" (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30 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.
2. The Corporation represents that this Waiver has been approved by the
Board of Directors of the Corporation or an authorized committee thereof and
that the President of the Corporation, Don R. Taylor, is authorized to execute
and deliver this Waiver on behalf of the Corporation.
3. All of the terms and provisions of this Waiver shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs, executors,
administrators, legal representatives, successors and assigns of the parties
hereto.
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, President
ATTEST:
/s/ Elizabeth McFarland
Elizabeth McFarland
Vice-President - Operations
"EXECUTIVE"
/s/ Gary F. Hentschel
Gary F. Hentschel
8922
EXHIBIT 10.62
WAIVER
THIS WAIVER (this "Waiver") is made and entered into the 17th day of
February, 1997, by and between PERSONNEL MANAGEMENT, INC., an Indiana
corporation (the "Corporation"), and ROBERT R. MILLARD (the "Executive").
WITNESSETH:
WHEREAS, Heartland Group, Inc., a Maryland corporation, and Heartland
Advisors, Inc., a Wisconsin corporation, (together "Heartland") beneficially
owns (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) certain shares of the outstanding common stock of the
Corporation; and
WHEREAS, Heartland wishes to acquire additional shares of the
outstanding common stock of the Corporation as a result of which Heartland may
become the beneficial owner of securities of the Corporation representing 20
percent or more of the combined voting power of the Corporation's outstanding
voting securities entitled to vote generally in the election of Directors (a "20
Percent Owner"); and
WHEREAS, the Corporation and the Executive believe it is in their best
interests for Heartland to acquire additional shares not exceeding certain
levels; and
WHEREAS, the Executive and the Corporation have entered into a Change
of Control Severance Benefits Agreement (the "Agreement") dated February 5,
1996; and
WHEREAS, Heartland becoming a 20 Percent Owner would constitute a
"Change of Control of the Corporation" as that term is defined in the Agreement;
and
WHEREAS, to avoid discouraging Heartland from acquiring additional
shares, the Executive and the Corporation wish to enter into this Waiver;
NOW, THEREFORE, in consideration of the foregoing, the promises
contained herein and other valuable consideration, it is hereby agreed by and
between the parties as follows:
1. For purposes of the Agreement and any other document that references the
Agreement, the Executive hereby waives and relinquishes any right to claim or
assert that Heartland's becoming a 20 Percent Owner, whether as the result of
its acquisition of additional shares or otherwise, constitutes a "Change of
Control of the Corporation" as that term is defined in the Agreement; provided,
however, that the foregoing waiver and relinquishment shall not apply to any
acquisition of additional shares (or the direct or indirect beneficial ownership
of securities of the Corporation by Heartland that results therefrom) that
results in Heartland or any "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) that includes
Heartland becoming the "beneficial owner" (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30 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.
2. The Corporation represents that this Waiver has been approved by the
Board of Directors of the Corporation or an authorized committee thereof and
that the President of the Corporation, Don R. Taylor, is authorized to execute
and deliver this Waiver on behalf of the Corporation.
3. All of the terms and provisions of this Waiver shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs, executors,
administrators, legal representatives, successors and assigns of the parties
hereto.
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, President
ATTEST:
/s/ Elizabeth McFarland
Elizabeth McFarland
Vice-President - Operations
"EXECUTIVE"
/s/Robert R. Millard
Robert R. Millard
<TABLE>
Exhibit 11
<CAPTION>
Statement Re: Computation of Earnings per Share
Primary Earnings Per Share
Year Ended October 31,
-------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding 2,020,510 2,020,156 1,977,571
Net effect of dilutive stock options and warrants - based on
the treasury stock method using average market price 38,743 11,282 60,901
------------ ------------ ------------
2,059,253 2,031,438 2,038,472
============ ============ ============
Net income $ 1,380,828 $ 1,014,794 $ 749,486
============ ============ ============
Net income per share $ 0.67 $ 0.50 $ 0.37
============ ============ ============
</TABLE>
Fully Diluted Earnings per Share
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding 2,020,510 2,020,156 1,977,571
Net effect of dilutive stock options and warrants - based on
the treasury stock method using the higher of period-end 56,800 14,073 81,247
market price or average market price ------------ ------------ ------------
2,077,310 2,034,229 2,058,818
============ ============ ============
Net income $ 1,380,828 $ 1,014,794 $ 749,486
============ ============ ============
Net income per share $ 0.66 $ 0.50 $ 0.36
============ ============ ============
</TABLE>
EXHIBIT 13
SELECTED FINANCIAL AND OPERATING DATA (UNAUDITED)
(in thousands, except per share and operating data)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE (1)
Net income $ 0.67 $ 0.50 $ 0.37 $ 0.68 $ 1.09
Pro forma net income (2) -- -- -- 0.65 0.68
Book value at year-end 5.35 4.65 4.13 3.76 1.58
FOR THE YEAR
Revenues $ 75,802 $ 67,101 $ 61,413 $ 39,650 $ 23,431
Income from operations 2,713 2,211 1,750 1,970 1,484
Income before income taxes 2,506 1,950 1,442 2,008 1,471
Net income 1,381 1,015 749 1,236 1,471
Pro forma net income (2) -- -- -- 1,180 920
Weighted average shares outstanding (1) 2,059 2,031 2,038 1,822 1,353
AT YEAR-END
Total assets $ 20,271 $ 16,935 $ 14,586 $ 14,046 $ 4,111
Long-term debt 3,350 2,508 3,738 3,072 --
Redeemable common stock (3) -- -- -- -- 232
Shareholders' equity 10,860 9,400 8,222 7,320 2,018
Working capital 5,163 3,596 4,540 3,649 1,246
OPERATING DATA
Operating margin(4) 1.8% 1.5% 1.2% 3.0% 3.9%
Offices at period-end 42 35 33 32 7
Clients served during the period 2,480 2,330 1,890 1,350 500
Total temporary personnel utilized 34,400 32,900 27,500 16,600 8,500
Staffing hours billed 7,618,500 6,699,400 6,315,800 4,013,800 2,515,500
</TABLE>
1 The Company declared a ten percent stock dividend in March 1995 and a 135
to 1 stock split in December 1993. Per share data and weighted average
shares outstanding have been adjusted for this stock dividend and split.
2 During the year ended October 31, 1993 and the quarter ended January 31,
1994, the Company was treated for income tax purposes as an S Corporation.
Consequently, no income tax provision was made for 1993 or the first
quarter of 1994. Pro forma net income includes pro forma income tax
adjustments.
3 Represents shares of common stock purchased by two Company officers prior
to the initial public offering with the proceeds of bank debt that was
guaranteed by the Company. These shares were repurchased by the Company
during the year ended October 31, 1994.
4 Represents net income (pro forma net income for 1994 and 1993) as a
percentage of revenues.
Since January 1994, the Company has purchased twelve temporary staffing
companies and completed an initial public offering of its common stock. These
events affect the comparability of the Company's finanacial data for 1994
through 1997. The Selected Financial and Operating Data are qualified with
reference to, and should be read in conjunction with, the consolidated financial
statements and "Management's Discussion and Analysis of Financial" Condition and
Results of Operations" contained herein.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Personnel Management, Inc and subsidiaries
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and accompanying notes.
OVERVIEW
The Company provides staffing and human resource services to businesses
throughout most of Indiana, portions of northern Kentucky, Atlanta, Georgia and
Jacksonville and Tampa, Florida. The Company's business primarily involves
providing temporary employees to industrial clients, although it also provides
clerical, technical and professional temporary staffing and long-term placement
services.
The Company has expanded its operations through the acquisition of other
staffing companies and opening new offices. In July 1994, the Company acquired
the assets of the four Porter Temporary Companies with six offices based in
Tampa, Florida. In September 1994, the Company acquired the assets of Human
Resource Services, Inc. and Human Resources, Inc. with 13 offices in northern
Indiana. On October 18, 1994, the Company acquired the common stock of Southern
Indiana Temporaries, Inc. and Quest Personnel Search, Inc. with eight offices in
southern Indiana and northern Kentucky. The Company acquired the assets of
Temporaries of Atlanta, Inc. with one office in Atlanta, Georgia in November
1995. In February 1996, the Company acquired the assets of Progressive Personnel
II, Inc. with three offices in Jacksonville, Florida.
During fiscal 1997, the Company opened five new staffing offices, and acquired
two staffing businesses and a minority equity investment in a professional
employer organization. The Company acquired on March 17, 1997 the assets of
Garner-Scott Enterprises, Inc., a staffing business with two offices based in
Madison, Indiana and Carrolton, Kentucky, and on March 24, 1997, the assets of
First In Temporaries, Inc.'s one office staffing operations in Louisville,
Kentucky. A minority equity investment was acquired on April 25, 1997 in
Adminiserve, Inc., a professional employer organization based in Greenwood,
Indiana. Management intends to pursue a strategy of opening new staffing
offices, acquiring other staffing businesses and expanding its services to
client companies.
All temporary employees are placed on the Company's payroll and the Company
therefore assumes responsibility for all employee-related expenses, including
workers' compensation, payroll taxes, unemployment compensation insurance and
general payroll expenses. The Company bills its clients for the hourly wages
paid to the temporary employee placed with the client, plus a negotiated markup.
Because the Company pays its temporary employees only for the hours actually
worked, these wages are a variable cost that increase or decrease in proportion
to revenues. The Company also generates fee income from the placement of staff
in long-term positions with clients.
RESULTS OF OPERATIONS
Revenues
<TABLE>
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(in thousands) 1997 Change 1996 Change 1995
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
Revenues $75,802 13.0% $67,101 9.3% $61,413
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
Revenues are recognized as income at the time staffing services are provided to
customers. The increase in revenues of $8,701,000 or 13.0% in fiscal 1997
compared to the prior year period was a result of internal growth of 7.3% and
revenues from acquired companies. Staffing services volume, as measured by hours
billed, increased 13.7% while prices decreased 0.7%. Revenue growth in the
Company's Indiana and northern Kentucky operations was 11.5% while revenues grew
17.3% in its southeastern U.S. operations. Staffing services to light industrial
customers accounted for 85% of total revenues in the current fiscal year while
clerical staffing services and placement fees accounted for the remaining
portion of revenues.
The increase in revenues of $5,688,000 or 9.3% in fiscal 1996 compared to the
prior year period was due entirely to revenues from the Company's southeastern
U.S. operations, which accounted for approximately 26.0% of consolidated
revenues for the year. As noted above, the Company acquired two temporary
staffing companies in the southeastern U.S. in fiscal 1996 and experienced an
11.9% increase in revenues in its Tampa operations. Revenues from the Company's
Indiana and northern Kentucky customer base for fiscal 1996 decreased 4.9%
compared to the previous year as a result of competitive pressures and reduced
demand. This decrease in revenues occurred in the first two quarters of fiscal
1996, since revenues from the last two quarters of the fiscal year increased
5.2% compared to the corresponding previous year period.
<PAGE> 3
Gross Margin
<TABLE>
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(in thousands) 1997 Change 1996 Change 1995
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
Gross margin $15,077 10.2% $13,684 12.6% $12,152
Percentage of revenues 19.9% 20.4% 19.8%
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
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. Between
fiscal 1996 and 1997 gross margin improved $1,393,000 or 10.2% primarily as a
result of an increased volume of services to customers. Gross margin as a
percentage of revenues decreased from 20.4% in fiscal 1996 to 19.9% in fiscal
1997 due to a new temporary employee benefit program and competitive pricing
pressures. In order to attract and retain qualified employees, a new benefit
program was introduced in January 1997 that provided the Company's temporary
employees with health, life insurance, vacation and holiday benefits.
Gross margin improved $1,532,000 or 12.6% between fiscal 1995 and 1996.
Approximately $1,125,000 or 73.4% of this improvement was due to an increased
volume of services provided to customers, while the remaining amount was
attributable to lower workers compensation costs and higher margin business
acquired in fiscal 1996 from the acquisitions in Atlanta, Georgia, and
Jacksonville, Florida. The lower workers' compensation costs were due to
favorable results from claims management practices and safety programs, and
favorable overall workers' compensation cost trends.
Operating Expenses
<TABLE>
- ------------------------------ -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(in thousands) 1997 Change 1996 Change 1995
- ------------------------------ -------------- -------------- -------------- -------------- --------------
Selling, general and
administrative $11,969 7.6% $11,126 9.9% $10,126
Percentage of revenues 15.8% 16.6% 16.5%
Amortization of goodwill $395 13.8% $347 25.7% $276
Percentage of revenues 0.5% 0.5% 0.5%
- ------------------------------ -------------- -------------- -------------- -------------- --------------
</TABLE>
Selling, general and administrative expenses increased $843,000 or 7.6% from
fiscal 1996 to 1997 due to $616,000 of expenses from businesses acquired in the
current fiscal year and $953,000 of expenses incurred by the Company to achieve
the higher revenue volume. These expenses were related to expanded sales and
marketing programs, five new branch office start-ups, six new Vendor-on-Premise
locations, and an overall inflationary increase in expenses. The Company expects
to continue these types of expenditures in personnel, systems and programs to
better meet its customers' needs and to increase revenues. Offsetting the
increase in selling, general and administrative expenses was a $726,000 decrease
in bad debt expense and professional fees as a result of strengthened credit
policies and procedures and reduced demand for professional services.
Selling, general and administrative expenses increased $1,000,000 or 9.9% from
fiscal 1995 to 1996 due entirely to the expenses associated with the new
businesses acquired by the Company in 1996. Expenses for the Indiana and Tampa
operations decreased approximately $536,000 primarily as a result of reduced
compensation expense and the Company's ongoing expense reduction program.
Offsetting this decrease in selling, general and administrative expenses was
higher bad debt expense of approximately $421,000 compared to the prior year
period.
Goodwill represents the unamortized cost in excess of fair value of net assets
acquired in the purchase of the previously mentioned companies, and is being
amortized on a straight-line basis over 20 years. The increase in goodwill
amortization between fiscal years was a result of additional acquisitions and
the amortization of payments of additional purchase price under earnout
provisions of prior acquisition agreements.
<PAGE> 4
Other Income (expense)
<TABLE>
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(in thousands) 1997 Change 1996 Change 1995
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
Other income (expense) $(207) 20.7% $(261) 15.3% $(308)
Percentage of revenues 0.3% 0.4% 0.5%
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
Other income (expense) consists primarily of interest expense net of interest
income. The $54,000 or 20.7% improvement in other income (expense) from fiscal
1996 to 1997 was due primarily to lower borrowing costs. Lower overall market
interest rates and reduced interest rate spreads on borrowings as a result of
refinancing the Company's credit facility in January 1997 reduced the Company's
average borrowing costs from 8.41% in fiscal 1996 to 7.16% in fiscal 1997.
The $47,000 or 15.3% improvement in other income (expense) from fiscal 1995 to
1996 was due to increased interest income on outstanding notes receivable and
reduced interest expense from lower interest rates on outstanding borrowings.
Income Tax Expense
<TABLE>
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(in thousands) 1997 Change 1996 Change 1995
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
Income tax expense $1,125 20.3% $935 34.9% $693
Percentage of revenue 1.5% 1.4% 1.1%
Effective tax rate 44.9% 48.0% 48.0%
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
The $190,000 or 20.3% increase in income tax expense in fiscal 1997 compared to
the prior year period was due to higher income before income taxes. Partially
offsetting this increase was a reduction in the Company's effective tax rate
from 48.0% in fiscal 1996 to 44.9% in the current fiscal year due primarily to
lower state income tax expense.
The increase in income tax expense of $242,000 or 34.9% in fiscal 1996 compared
to the prior year period was due entirely to increased income before income
taxes. The effective tax rate in both years remained constant at 48.0%.
Net Income and Income Per Share
<TABLE>
- --------------------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share 1997 Change 1996 Change 1995
data)
- --------------------------------- -------------- -------------- ------------- -------------- --------------
Net income $1,381 36.1% $1,015 35.5% $749
Percentage of revenue 1.8% 1.5% 1.2%
Net income per share $0.67 34.0% $0.50 35.1% $0.37
- --------------------------------- -------------- -------------- ------------- -------------- --------------
</TABLE>
Factors contributing to the changes in net income for fiscal 1996 and 1997 are
discussed in the detail above.
Inflation
The effects of inflation on the Company's operations were not significant during
the periods presented in the financial statements.
Seasonality
The Company's revenues and quarterly results have typically been seasonal
because of the Company's concentration towards staffing the personnel needs of
industrial clients. Industrial production is typically seasonal due to year-end
inventory reduction goals of many of the Company's manufacturing clients and the
holiday season from Thanksgiving through New Year's Day. This seasonal downtime
in industrial operations greatly reduces the needs for the Company's temporary
personnel during winter months. As a result, the Company historically has
experienced its highest revenues of each fiscal year during its fiscal fourth
quarter that ends October 31 and has experienced its weakest revenues in the
first quarter, which ends January 31.
<PAGE> 5
Financial Condition, Liquidity and Capital Resources
<TABLE>
- ----------------------------------------------------- ---------------- ----------------- -----------------
<CAPTION>
<S> <C> <C> <C>
(in thousands) 1997 1996 1995
- ----------------------------------------------------- ---------------- ----------------- -----------------
Working capital $ 5,163 $ 3,596 $ 4,540
Notes payable 3,883 3,008 3,855
Cash provided (used) by operating activities (438) 2,494 767
Cash used by investing activities (1,497) (1,788) (1,003)
Cash provided (used) by financing activities 1,938 (698) 170
- ----------------------------------------------------- ---------------- ----------------- -----------------
</TABLE>
The Company's primary sources of funds over the past three years were from
operations and borrowings under its credit facility. The Company's principal
uses of cash were to fund working capital, capital expenditures, acquisitions
(including payments under the earnout provisions of acquisition agreements), and
the repayment of outstanding borrowings. Temporary employees are generally paid
weekly for their services while payments from customers are generally received
within 30 to 45 days from the date of invoice. As new offices are established or
acquired, or as existing offices expand, there will be increasing requirements
for cash resources to fund current operations.
Net income and related non-cash adjustments provided $2,105,000 in fiscal 1997,
while net borrowings on the bank line of credit provided $1,375,000. Other
sources of cash included $69,000 from the exercise of stock options.
Uses of cash in the current fiscal year were $2,543,000 for changes in working
capital, $600,000 for acquisitions of other staffing companies, $406,000 for
payments under the earnout provisions of prior acquisition agreements, $491,000
for capital expenditures, and $500,000 for payments on outstanding borrowings.
The use of cash for changes in working capital was due primarily to a $2,429,000
increase in accounts and note receivable as a result of the increase in
revenues. The Company's accounts receivable days sales outstanding slightly
increased to 36.9 days from 35.1 days in the prior fiscal year.
Total capitalization at October 31, 1997 was $14,743,000, comprised of
$3,883,000 of debt and $10,860,000 of equity. Debt as a percentage of total
capitalization increased from 24.2% in fiscal 1996 to 26.3% in fiscal 1997.
On January 21, 1997, the Company refinanced its bank credit facility with
KeyBank, NA. The refinanced bank credit facility provides the Company with the
ability to borrow up to $11,000,000 for general working capital purposes,
acquisition financing, letters of credit and the refinancing of outstanding
borrowings. 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 meeting certain borrowing base requirements. Upon maturity, up to
$4,000,000 of borrowings for acquisition financing under this line convert to a
five-year term loan. At October 31, 1997, the Company's availability under the
line of credit was approximately $5,900,000. The $2,500,000 term loan is payable
in equal monthly principal installments of $42,000. The credit facility is
secured and collateralized by account receivable, equipment, cash, general
intangibles, contract rights, and proceeds thereof. In addition, the Company has
agreed with the bank under the credit facility to certain financial and
non-financial restrictive covenants, which include, among other things, minimum
levels of tangible net worth, minimum cash flow coverage ratios, maximum ratio
of indebtedness to earnings, restrictions on capital expenditures, restrictions
on capital stock repurchases, and restrictions on future mergers,
consolidations, acquisitions or joint ventures. At October 31, 1997, the Company
was in compliance with its covenants.
The Company has issued irrevocable letters of credit in the amount of $900,000
on behalf of the Company's workers' compensation insurance carriers to pay third
parties in accordance with state workers' compensation regulations. These
letters of credit reduce the amount available to the Company under its credit
facility.
The Company believes that cash provided by operations, augmented by borrowings
for working capital purposes under its credit facility, will be sufficient to
cover its capital expenditures and working capital needs in fiscal year 1998.
OTHER MATTERS
In 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123
"Accounting for Stock Based Compensation", which became effective for the
Company for the fiscal year ended October 31, 1997. The Company adopted only the
disclosure provisions of the statement. Adoption of this statement did not
materially affect the consolidated results of operations.
In 1997, the FASB issued SFAS No. 128 "Earnings per Share" and SFAS No. 129
"Disclosure of Information about Capital Structure". Both statements become
effective for the Company for the first quarter ended January 31, 1998. Adoption
of these statements will not materially affect the disclosures in the
consolidated financial statements.
In 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information", which does not become effective for the
Company until the fiscal year ended October 31, 1999. Adoption of this statement
will not materially affect the disclosures in the consolidated financial
statements.
<PAGE> 6
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish or otherwise disclose forward-looking
statements relating to such matters as (a) the Company's expectations for
continued growth of the temporary staffing industry, (b) the Company's plans to
achieve increased revenues and earnings through internal growth, the opening of
new offices, the introduction of new products and programs, and expense
reductions, and (c) the Company's plans to expand and diversify its revenues
through the acquisition of other temporary staffing companies. In order to
comply with the terms of a "safe harbor" provided by the Private Securities
Litigation Reform Act of 1995 that protects the making of such forward-looking
statements from liability under certain circumstances, the Company notes that a
variety of factors could cause the Company's actual results or experience to
differ materially from the anticipated results or other expectations described
or implied by these forward-looking statements. The risks and uncertainties that
may affect the operations, performance, development and results of the Company's
business include the following: (a) the risk of adverse changes in the future
level of business activity of the Company's clients and prospective clients
caused by geographic or industry-specific economic downturns which might cause
such clients and prospective clients to require fewer temporary employees, (b)
the potential for adverse shifts in demand for temporary employees nationwide
that might be caused by future national economic downturns, adverse legal or
regulatory developments, or other staffing industry factors, (c) the risk of
adverse changes in the availability of qualified temporary employees in the
geographic areas in which the Company operates, (d) the possible inability of
the Company to identify, finance and complete suitable acquisitions of other
staffing companies upon reasonable acquisition terms and conditions on a timely
basis, and the potential that such acquisitions might prove to be unprofitable
due to undisclosed liabilities, loss of customers, management of the acquired
businesses, or other risks generally associated with business acquisitions, and
(e) other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
<PAGE> 7
Report of Independent Auditors
Shareholders and Board of Directors
Personnel Management, Inc.
We have audited the accompanying consolidated balance sheets of
Personnel Management, Inc. as of October 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended October 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Personnel Management, Inc. at October 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended October 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Indianapolis, Indiana
December 5, 1997
<PAGE> 8
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(in thousands, except share data) October 31,
--------------------------------------
Assets 1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash $ 183 $ 180
Accounts receivable, net of allowance of $153 in 1997 and 1996 10,005 7,549
Current portion of notes receivable 72 99
Income taxes receivable 17 25
Prepaid expenses 180 110
Deferred tax asset 515 434
Other current assets 79 71
---------------- -------------
Total current assets 11,051 8,468
Property and equipment, net 1,301 1,209
Notes receivable, shareholder 553 508
Goodwill, net 7,220 6,636
Other 146 114
---------------- -------------
7,919 7,258
---------------- ------------
Total assets $ 20,271 $ 16,935
================ =============
Liabilities and Shareholders' Equity
Current Liabilities:
Cash overdraft $ 1,100 $ 106
Accounts payable 332 285
Accrued compensation and benefits 2,537 2,822
Accrued workers' compensation claims 1,024 752
Income taxes payable 125 160
Other current liabilities 237 247
Current portion of notes payable 533 500
---------------- -------------
Total current liabilities 5,888 4,872
Notes payable, less current portion 3,350 2,508
Deferred tax liability 173 155
Commitments and contingencies
Shareholders' equity:
Preferred stock, without par value, authorized 4,000,000 shares, no
shares issued or outstanding - -
Common stock, without par value, authorized 20,000,000 shares, issued
and outstanding 2,028,918 and 2,020,156 shares in 1997 and 1996,
respectively 7,925 7,846
Retained earnings 2,935 1,554
---------------- -------------
Total shareholders' equity 10,860 9,400
---------------- -------------
Total liabilities and shareholders' equity $ 20,271 $ 16,935
================ =============
See accompanying notes.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Consolidated Statements of Income
(in thousands, except per share data) Year ended October 31,
-----------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $ 75,802 $ 67,101 $ 61,413
Cost of services 60,725 53,417 49,261
------------- ------------- -------------
Gross margin 15,077 13,684 12,152
Operating expenses:
General and administrative 11,562 10,770 9,691
Selling 407 356 435
Amortization of goodwill 395 347 276
------------- ------------- -------------
12,364 11,473 10,402
Income from operations 2,713 2,211 1,750
Other income (expense):
Interest expense (260) (319) (341)
Interest and other income 53 58 33
------------- ------------- -------------
(207) (261) (308)
------------- ------------- -------------
Income before income taxes 2,506 1,950 1,442
Income taxes 1,125 935 693
------------- ------------- -------------
Net income $ 1,381 $ 1,015 $ 749
============= ============= =============
Net income per share $ 0.67 $ 0.50 $ 0.37
============= ============= =============
Weighted average shares outstanding 2,059 2,031 2,038
============= ============= =============
See accompanying notes.
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
(in thousands) Year ended October 31,
----------------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $ 1,381 $ 1,015 $ 749
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Amortization of goodwill 395 347 276
Depreciation 417 364 281
Deferred income taxes (63) (114) (13)
Shareholder loan activity, net (35) (39) (22)
Loss on disposal of property and equipment
10 14 -
Changes in operating assets and
liabilities, net of purchases of businesses
and additions to goodwill:
Accounts and notes receivable (2,429) (1,251) 23
Prepaid expenses and other assets (103) 204 (141)
Accounts payable 47 55 (306)
Accrued liabilities and other payables (58) 1,899 (80)
-------------- --------------- ---------------
Net cash provided (used) by operating activities (438) 2,494 767
Investing activities:
Purchases of businesses and additions to goodwill (1,006) (1,517) (583)
Purchases of property and equipment (491) (271) (420)
-------------- --------------- ---------------
Net cash used by investing activities (1,497) (1,788) (1,003)
Financing activities:
Proceeds from the exercise of stock options 69 225 -
Loan to officer, net of repayment - (62) -
Tax benefit resulting from exercise of stock
options - - 153
Net change in bank overdrafts 994 (15) 16
Payments on notes payable (500) (116) (779)
Net borrowings (payments) on bank line of credit 1,375 (730) 780
-------------- --------------- ---------------
Net cash provided (used) by financing activities 1,938 (698) 170
-------------- --------------- ---------------
Increase (decrease) in cash 3 8 (66)
Cash at beginning of period 180 172 238
============== =============== ===============
Cash at end of period $ 183 $ 180 $ 172
============== =============== ===============
See accompanying notes.
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
(in thousands, except share data) Common Stock Retained
--------------------------------
Shares Amount Earnings Total
<S> <C> <C> <C> <C>
Balance at October 31, 1994 $ 1,771,172 $ 4,564 $ 2,756 $ 7,320
Net income - - 749 749
Exercise of stock options 40,122 - - -
Stock dividend 179,793 2,966 (2,966) -
Tax benefit resulting from exercise
of stock options - 153 - 153
------------ ------------ -------------- ------------
Balance at October 31, 1995 1,991,087 7,683 539 8,222
Net income - - 1,015 1,015
Exercise of stock options 29,069 225 - 225
Loan to officer, net of repayment - (62) - (62)
------------ ------------ -------------- ------------
Balance at October 31, 1996 2,020,156 7,846 1,554 9,400
Net income - - 1,381 1,381
Exercise of stock options 8,762 69 - 69
Reduction in loan to officer - 10 - 10
============ ============ ============== ============
Balance at October 31, 1997 2,028,918 $ 7,925 $ 2,935 $ 10,860
============ ============ ============== ============
See accompanying notes.
</TABLE>
<PAGE> 12
Notes to the Consolidated Financial Statements
October 31, 1997
1. Basis of Presentation and Significant Accounting Policies
Personnel Management, Inc. was founded in 1986 to provide temporary help and
human resource services in areas of industrial, clerical and technical support.
The Company services customers in Indiana, Florida, Georgia and Kentucky. The
accompanying financial statements include the accounts of the Company and its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation. Certain reclassifications have been made
to conform prior years' information to the current year's presentation.
ACCOUNTS RECEIVABLE
Due to the nature of the business, accounts receivable are due primarily from
manufacturing and distribution companies located in Indiana, Florida, Georgia
and Kentucky. Collateral is generally not required.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and depreciation is computed using the
straight-line method over the estimated useful lives of the respective assets,
ranging from 3 to 7 years.
GOODWILL
Goodwill consists of the amount of purchase price above the fair value of net
assets acquired and is being amortized on a straight-line basis over a period of
20 years. Additional purchase price arising from earnout provisions as stated in
Note 2 is also allocated to goodwill. Management periodically reviews the
potential impairment of goodwill using expected cash flows in order to determine
its proper carrying value as of each balance sheet date presented. At October
31, 1997 and 1996, accumulated amortization of goodwill was $1,040,000 and
$645,000, respectively.
CASH OVERDRAFT
Cash overdraft includes checks drawn on various disbursement accounts that
exceed net book cash balances at each financial institution. Such disbursement
accounts are subsequently replenished upon presentation of these checks for
payment.
ACCRUED WORKERS' COMPENSATION CLAIMS
The Company is self-insured for certain workers' compensation risks and is
covered by insurance policies for certain other risks. The Company records
liabilities for losses and premium adjustments using various case basis
evaluations. The liabilities for losses and premium adjustments include
estimates of future trends in claim severity and frequency and other factors
that can vary as losses and premium adjustments are ultimately settled. These
estimates are continually reviewed and adjustments are reflected in current
operations. Although it is not possible to measure the degree of variability
inherent in such estimates, management believes the recorded liability is
adequate.
<PAGE> 13
REVENUE RECOGNITION
Revenues and the related costs are recognized as temporary services are
provided.
PER SHARE DISCLOSURES
Per share amounts have been calculated based on the average common and common
equivalent shares outstanding for the respective periods. Stock options and
warrants are considered common stock equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Management has estimated that the fair value of cash, accounts and notes
receivable, prepaid expenses, other current assets, accounts payable and accrued
liabilities approximates the carrying value due to the relatively short period
of time until expected realization. The aggregate fair value of notes payable
approximates its carrying amount because of the recent and frequent repricing
based on market conditions.
ACCOUNTING PRINCIPLES PENDING ADOPTION
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share (EPS)".
This statement simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion ("APB") No. 15 "Earnings
per Share". The Company will adopt the Statement in fiscal 1998 as required by
SFAS No. 128. The Company does not expect the statement to have a material
impact on the earnings per share calculations given the current capital
structure of the Company.
2. Acquisitions
The Company acquired the assets of Temporaries of Atlanta, Inc. on November 13,
1995 for $600,000, plus 42% of future income before taxes and other adjustments
derived from the areas served by the business through October 31, 2000.
Effective February 5, 1996, the Company acquired the assets of Progressive
Personnel II, Inc. for $250,000, plus 71% of future income before taxes and
other adjustments derived from one significant customer served by the business
through January 31, 2001.
On March 17, 1997, the Company acquired the assets of Garner-Scott Enterprise,
Inc. for $250,000 plus 33.3% of income before income taxes and other adjustments
derived from the areas served by the businesses through February 28, 2002.
The Company acquired the assets of the Louisville, Kentucky branch office of
First In Temporaries, Inc. on March 24, 1997 for $311,000.
<PAGE> 14
These acquisitions were recorded using the purchase method of accounting which
allocates the purchase price to the assets and liabilities acquired, based upon
the fair value at the time of acquisition. The Company has recorded $2,100,000
of goodwill related to these acquisitions. The results of operations of these
acquired companies have been included in the Company's consolidated financial
statements since the respective dates of acquisition.
The impact of these acquisitions was not material in relation to the Company's
results of operations. Consequently, pro forma information is not presented.
3. Property and Equipment
The composition of property and equipment was as follows:
<TABLE>
<CAPTION>
October 31,
----------------------------------------------------
(in thousands) 1997 1996
---- ----
<S> <C> <C>
Equipment, furniture and fixtures $ 2,233 $ 1,793
Leasehold improvements 353 320
Vehicles 113 96
------------------- ------------------
2,699 2,209
Accumulated depreciation (1,398) (1,000)
------------------- ------------------
$ 1,301 $ 1,209
=================== ===================
</TABLE>
4. Credit Arrangements The composition of notes payable was as follows:
<TABLE>
<CAPTION>
October 31,
----------------------------------------------------
(in thousands) 1997 1996
---- ----
<S> <C> <C>
Bank line of credit $ 1,725 $ 350
Bank term loan 2,125 2,500
Note payable - seller 33 158
------------------- -------------------
3,883 3,008
Less current portion:
Bank term loan 500 375
Note payable - seller 33 125
------------------- ------------------
533 500
------------------- ------------------
Notes payable beyond one year $ 3,350 $ 2,508
=================== ==================
</TABLE>
<PAGE> 15
The Company's 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 revolving
line of credit terminates on January 31, 1999. Upon termination, borrowings for
acquisition financing under this line convert to a five year term loan. At
October 31, 1997, the Company's availability under the line of credit was
$5,875,000 at an interest rate of LIBOR plus 1.25%. The 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 October 31, 1997, the interest rate was LIBOR plus
1.50%.
Amounts due to the bank under the credit facility are secured and collateralized
by the Company's accounts receivable, equipment, cash, general intangibles,
contract rights, and proceeds thereof. In addition, the Company is subject to
certain financial and non-financial restrictive covenants, which include, among
other things, minimum levels of tangible net worth, minimum cash flow coverage
ratios, maximum ratio of indebtedness to earnings, restrictions on capital
expenditures, restrictions on common stock repurchases, and restrictions on
future mergers, consolidations, acquisitions or joint ventures.
The sellers of entities previously acquired by the Company accepted a
non-interest bearing note in the amount of $400,000, payable in twelve equal
quarterly installments beginning on March 31, 1995. The $400,000 note payable
has been discounted at 7.28%.
The Company has issued irrevocable letters of credit in the amount of $900,000
on behalf of the Company's workers' compensation insurance carriers to pay third
parties in accordance with state workers' compensation regulations. These
letters of credit reduce the amount available to the Company under its credit
facility.
Cash paid for interest during 1997, 1996, and 1995 was $260,000, $328,000, and
$309,000, respectively.
At October 31, 1997, aggregate future principal payments are as follows:
During the year ending October 31,
(in thousands)
1998 $ 533
1999 2,225
2000 500
2001 500
2002 125
=================
$ 3,883
=================
<PAGE> 16
5. Shareholders' Equity
On April 15, 1997, the Company forgave $10,000 of the outstanding loan balance
to an officer of the Company. The remaining loan balance of $52,000 is reflected
as a deduction from common stock and interest is credited to income as it
accrues. The loan matures in January 1998.
On April 15, 1996, the Company extended a loan to an officer of the Company in
the amount of $123,000 for the purpose of paying income taxes in connection with
the officer's December 29, 1994 exercise of non-qualified stock options to
purchase 49,486 shares of common stock of the Company. The loan bears interest
at 8.25% and is secured by 24,670 shares of common stock of the Company. The
loan is reflected as a deduction from common stock and interest is credited to
income as it accrues. On June 6, 1996, $61,000 of the loan was repaid by the
officer.
EMPLOYEE STOCK OPTION AND STOCK PURCHASE PLANS
On April 30, 1995, the Company adopted the 1994 Directors Stock Option Plan
which authorizes the grant of stock options to non-employee directors in lieu of
fees. This plan reserves 44,000 shares of common stock for future issuance.
Concurrent with an acquisition in 1994, the Company issued an option to the
principal shareholder of the sellers to buy cumulatively up to 43,757 shares of
common stock at $8.23 per share, subject to certain conditions. No options have
been exercised as of October 31, 1997.
Effective with the Company's 1994 initial public offering, the Company adopted
the 1994 Stock Option Plan which authorizes the grant of stock options to
employees. This Plan reserves 198,000 shares of common stock for future
issuance. The Plan terminates on December 1, 2003.
At the time of the offering, the Company also granted warrants to the managing
underwriter and its assignees to purchase an aggregate of 52,416 shares of
common stock at an exercise price of $9.27 per share. The warrants are
exercisable through January 26, 1999.
In February 1993, the Company adopted a Stock Option Plan which provides for the
granting of stock options to certain salaried employees. A total of 178,717
shares of common stock have been reserved for issuance under the Plan. Options
under the Plan are to be granted at no less than the estimated fair market value
of the underlying shares at the date of the grant (calculated in accordance with
a formula set forth in the plan document). The Plan also provided for
replacement options to be granted at current market prices to replace shares
tendered in lieu of cash to exercise options. The Plan terminates in February
2003.
<PAGE> 17
Information pertaining to employee and director stock option plans is as
follows:
<TABLE>
<CAPTION>
Stock Option Plans
----------------------------------------------------
1994 1993 1994 Weighted average
Employee Plan Employee Plan Directors Plan exercise price per share
<S> <C> <C> <C> <C>
Outstanding at October 31, 1994 - 178,717 - $ 7.54
Granted 7,040 62,252 13,200 12.44
Exercised - (105,055) - 7.41
Canceled - (45,104) - 12.05
------------ ------------ ------------ ---------
Outstanding at October 31, 1995 7,040 90,810 13,200 9.47
Granted 113,000 - 11,825 7.56
Exercised - (29,069) - 7.73
Canceled - (17,148) - 13.73
------------ ------------ ------------ ---------
Outstanding at October 31, 1996 120,040 44,593 25,025 8.09
Granted 42,125 - 10,450 10.09
Exercised (1,000) (7,762) - 7.83
Canceled (8,000) (29,069) - 7.92
============ =========== ============ =========
Outstanding at October 31, 1997 153,165 7,762 35,475 $ 8.68
============ =========== ============ =========
Options exercisable at:
October 31, 1995 7,040 90,810 - $ 9.09
October 31, 1996 30,040 44,593 6,600 $ 8.43
October 31, 1997 61,665 7,762 19,113 $ 8.94
</TABLE>
The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation" in
1997 which establishes a fair value based method of accounting for stock-based
compensation plans. As permitted by SFAS No. 123, the Company has elected to
continue to account for employee stock options following APB No. 25, "Accounting
for Stock Issued to Employees" and related Interpretations. Under APB No. 25,
because the exercise price of the Company's employee stock options is equal or
greater than the market price of the underlying stock on the date of grant, no
compensation expense has been recognized in the 1997 and 1996 financial
statements.
The weighted average fair value of the options granted during 1997 and 1996 is
estimated at $2.60 and $1.92 per share, respectively, on the grant date. These
estimates were made using the Black-Scholes option pricing model with the
following weighted average assumptions used for valuing option grants: risk-free
interest rate of 6.0%, expected dividend yield of zero, expected lives of 3-5
years, and expected volatility of 22.7%. SFAS No. 123 is applicable only to
options granted subsequent to October 31, 1995. For purposes of pro forma
disclosure, the estimated fair value of the options is amortized to expense over
the options' vesting periods (1 - 4 years). As a result, the pro forma effect of
options granted will not be fully reflected until 2000. Pro forma information is
as follows:
<PAGE> 18
Year ended October 31,
(in thousands, except per share data) 1997 1996
---- ----
Net income:
As reported $1,381 $1,015
Pro forma 1,274 941
Net income per share:
As reported $0.67 $0.50
Pro forma 0.62 0.46
Options outstanding at October 31, 1997 expire from February 1999 to October
2007. A total of 52,360 shares are reserved for future grants as of October 31,
1997 under the option plans. The following table summarizes information
concerning outstanding and exercisable options and warrants at October 31, 1997:
<TABLE>
<CAPTION>
Range of Exercise Prices $5 - 9 $9 - 13 $13 - 17
------ ------- --------
<S> <C> <C> <C>
Options outstanding:
Weighted average remaining contractual life 6.1 years 4.1 years 2.6 years
Weighted average exercise price $7.68 $9.94 $15.74
Number 171,344 116,281 4,950
Options exercisable:
Weighted average exercise price $7.56 $9.78 $15.74
Number 58,675 77,331 4,950
</TABLE>
6. Income Taxes
<PAGE> 19
<TABLE>
<CAPTION>
The provision for income taxes is as follows:
Year ended October 31,
--------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Current:
Federal $ 943 $ 787 $ 424
State 245 262 170
-------------------- -------------------- --------------------
1,188 1,049 594
Deferred:
Federal (49) (87) 85
State (14) (27) 14
-------------------- -------------------- --------------------
(63) (114) 99
==================== ==================== ====================
$ 1,125 $ 935 $ 693
==================== ==================== ====================
</TABLE>
<PAGE> 20
The reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
Year ended October 31,
--------------------------------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax at US statutory rates 34.0% 34.0% 34.0%
State income tax, net of federal
tax benefit 6.1 8.0 6.3
Amortization of nondeductible
goodwill 2.5 3.2 4.0
Targeted jobs tax credit (0.7) - (2.5)
Other, net 3.0 2.8 6.2
==================== ==================== ====================
44.9% 48.0% 48.0%
==================== ==================== ====================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The deferred tax
liabilities relate primarily to amortization of goodwill and depreciation of
property and equipment over longer periods for financial reporting purposes.
Deferred tax assets relate primarily to the recording of workers' compensation
claims and provision for doubtful accounts for financial reporting purposes in
advance of tax treatment. Deferred income tax components are as follows:
<TABLE>
<CAPTION>
October 31,
------------------------------------
(in thousands) 1997 1996
---- ----
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book depreciation $ 92 $ 108
Tax amortization in excess of book amortization 81 47
============ =============
Noncurrent deferred tax liability $ 173 $ 155
============ =============
Deferred tax assets:
Accrued workers' compensation claims $ 409 $ 303
Allowance for bad debts 61 62
Other deductible temporary differences 45 69
============ =============
Current deferred tax asset $ 515 $ 434
============ =============
</TABLE>
Payments for income taxes during 1997, 1996 and 1995 were $1,220,000, $993,000,
and $618,000, respectively.
7. Leases
The Company leases vehicles and office space under noncancelable operating
leases which terminate at various dates through 2001. Rental expense was
approximately $725,000, $628,000 and $506,000 for 1997, 1996 and 1995,
respectively.
Certain of the office space is leased from an entity owned by certain officers
and directors of the Company. Rental expense under these leases, which is
included in the above amounts, aggregated $123,000, $123,000 and $106,000 in
1997, 1996 and 1995, respectively.
<PAGE> 21
At October 31, 1997, aggregate future minimum noncancelable lease payments are
as follows:
During the year ending October 31,
(in thousands)
1998 $ 753
1999 554
2000 248
2001 46
=================
$ 1,601
=================
8. Notes Receivable, Shareholder
The Company has unsecured notes receivable from an officer, director, and
shareholder maturing December 1999 with an outstanding balance of $553,000 and
$508,000 at October 31, 1997 and 1996, respectively. At October 31, 1997 these
notes accrued interest at a rate of 8.75%.
9. Major Customers
The Company derives a significant amount of revenue from several major
customers. In 1997, three customers accounted for 15% of revenues. In 1996, two
customers accounted for 11% of revenues. In 1995, no one customer accounted for
more than 5% of total revenues.
10. 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.
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 on the financial position of the
Company.
<PAGE> 22
11. Quarterly Results of Operations (Unaudited)
The following table presents the quarterly results of operations for each period
presented.
<TABLE>
<CAPTION>
Condensed Consolidated Statements of Income
(in thousands, except per share Three Months ended
data)
January 31, April 30, July 31, October 31,
1997 1997 1997 1997
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 16,627 $ 17,954 $ 19,075 $ 22,146
Gross margin 3,239 3,641 3,819 4,378
Income from operations 370 758 701 884
Income before income taxes 323 710 651 822
Net income 168 369 381 463
Net income per share $ 0.08 $ 0.18 $ 0.19 $ 0.22
</TABLE>
<TABLE>
<CAPTION>
Three Months ended
January 31, April 30, July 31, October 31,
1996 1996 1996 1996
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 14,030 $ 16,388 $ 17,145 $ 19,538
Gross margin 2,802 3,407 3,475 4,000
Income from operations 216 568 601 826
Income before income taxes 146 503 539 762
Net income 82 282 252 399
Net income per share $ 0.04 $ 0.14 $ 0.12 $ 0.20
</TABLE>
<PAGE> 23
CORPORATE DATA
Personnel Management, Inc. and subsidiaries
Executive Officers and Directors
Don R. Taylor, Director
Chief Executive Officer
Personnel Management, Inc.
Gary F. Hentschel
President & Chief Operating Officer
Personnel Management, Inc.
Robert R. Millard
Vice President of Finance and Administration,
Secretary and Treasurer
Personnel Management, Inc.
Joseph C. Cook, Jr., Director
President, Cambrian Associates LLC,
a consulting firm
Max K. DeJonge, Director
President and Chief Executive Officer
O'Neal Steel, Inc., a steel distributor
David L. Swider, Director 1,2
Partner, Bose McKinney & Evans,
an Indianapolis law firm
Richard L. VonDerHaar, Director 1,2
Senior Vice President of Municipal Finance
David A. Noyes & Company,
an investment banking firm
1. Member of the Compensation Committee
2. Member of the Audit Committee
Independent Auditors
Ernst & Young LLP
Indianapolis, Indiana
Legal Counsel
Leagre Chandler & Millard
Bose McKinney and Evans
Indianapolis, Indiana
Form 10-K
PMI's annual report to the SEC is available without charge upon written request
to Robert R. Millard, Vice President, at our corporate offices.
<PAGE> 24
Registrar and Transfer Agent
National City Bank
Cleveland, Ohio
Common Stock
The Company's common stock trades on the Nasdaq
National Market tier of the Nasdaq Stock Market under
the symbol: TPMI. The following are the high and low
id prices by fiscal quarters, as reported by Nasdaq.
1997 1996
-------------- -----------------
Quarter ended High Low High Low
Jan. 31 $9.25 $6.75 $ 9.75 $5.25
April 30 10.00 9.25 8.50 5.75
July 31 9.75 9.25 9.00 6.25
Oct. 31 12.50 9.75 8.75 6.00
These bid quotations reflect interdealer prices, do not include retail markups,
markdowns or commissions, and do not necessarily represent actual transactions.
The Company's common stock is held by approximately 1,000 holders (including
those whose shares are held in "street name").
The Company has not declared or paid any cash dividends, and presently does not
intend to do so in the foreseeable future.
Annual Meeting of Shareholders
March 5, 1998
Bank One Center/Tower
3rd Floor, Conference Room A
Indianapolis, Indiana
Investor Relations
Robert R. Millard
Vice President of Finance and Administration
Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
(317) 888-4400
EXHIBIT 21
PERSONNEL MANAGEMENT, INC.
List of Subsidiaries
Name of Subsidiary State or Other Jurisdiction
of Incorporation
or Organization
PMI Holdings, Inc. Delaware
PMI Administration, Inc. Indiana
PMI LP I Indiana
PMI LP II Indiana
Quest Personnel Search, Inc. Indiana
Southern Indiana
Temporaries, Inc. Indiana
8947
Exhibit 23
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-85814) pertaining to the Personnel Management, Inc. Amended and
Restated 1993 Stock Option Plan, Personnel Management, Inc. 1994 Stock Option
Plan, and Personnel Management, Inc. Employees 401(K) Retirement Plan and Trust,
of our report dated December 5, 1997, with respect to the consolidated financial
statements incorporated by reference in the Annual Report (Form 10-K) for the
year ended October 31, 1997.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
January 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FILER'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 182,981
<SECURITIES> 0
<RECEIVABLES> 10,157,312
<ALLOWANCES> 152,800
<INVENTORY> 0
<CURRENT-ASSETS> 11,051,259
<PP&E> 2,698,814
<DEPRECIATION> 1,398,177
<TOTAL-ASSETS> 20,270,816
<CURRENT-LIABILITIES> 5,887,894
<BONDS> 3,349,987
0
0
<COMMON> 7,924,994
<OTHER-SE> 2,934,741
<TOTAL-LIABILITY-AND-EQUITY> 20,270,816
<SALES> 75,802,268
<TOTAL-REVENUES> 75,802,268
<CGS> 60,724,746
<TOTAL-COSTS> 61,132,014
<OTHER-EXPENSES> 11,957,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,395
<INCOME-PRETAX> 2,506,327
<INCOME-TAX> 1,125,500
<INCOME-CONTINUING> 1,380,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,380,827
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.66
</TABLE>
