<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27204
TECHFORCE CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 58-2082077
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(State of Incorporation) (I.R.S. Employer Identification No.)
15950 Bay Vista Drive, Clearwater, Florida 34620
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (813) 532-3600
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________________________________________________________________________________
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicated by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of November 10, 1997, there were 8,111,904 shares of the issuer's
common stock outstanding.
<PAGE>
TECHFORCE CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
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<S> <C> <C>
Item 1 Financial Statements....................................... 1
. Consolidated Balance Sheet............................... 1
. Consolidated Statements of Income........................ 2
. Consolidated Statements of Cash Flows.................... 3
. Notes to Consolidated Financial Statements............... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 6
Item 3. Quantitative and Qualitative Disclosures
About Market Risks..................................... 11
<CAPTION>
PART II. OTHER INFORMATION
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<S> <C> <C>
Item 1 Legal Proceedings........................................... 12
Item 2 Changes in Securities....................................... 12
Item 3 Defaults Upon Senior Securities............................. 12
Item 4 Submission of Matters to a Vote of Shareholder.............. 12
Item 5 Other Information........................................... 12
Item 6 Exhibits and Reports on Form 8-K............................ 12
SIGNATURES
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Signatures............................................................... 13
EXHIBIT INDEX
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</TABLE>
<PAGE>
TECHFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
ASSETS September 30, 1997 December 31, 1996
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,619 $ 3,943
Investments 4,134 2,299
Accounts receivable, net of Allowance for Doubtful Accounts 12,009 12,687
of $313 and $845 at Sept 30, 1997 and Dec 31, 1996, respectively
Inventories 3,480 4,446
Net Investment in Sales Type Leases (current portion) 2,886 2,438
Prepaid expenses/Other Assets 1,016 741
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Total current assets 26,144 26,554
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PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements 630 582
Office furniture and fixtures 6,778 4,885
Replacement parts 16,222 11,542
Equipment held for rental 733 1,038
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24,363 18,047
Less accumulated depreciation (9,603) (6,736)
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Total property, plant and equipment, net 14,760 11,311
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NET INVESTMENT IN SALES TYPE LEASES 10,961 8,545
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Less current portion
ORGANIZATION COSTS AND OTHER ASSETS 166 73
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Total assets $ 52,031 $ 46,483
================= ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,290 $ 2,583
Accrued expenses 2,701 3,259
Accrued contract labor 408 600
Current maturities of obligations under capital leases,
long-term debt and non-recourse notes payable 3,108 2,644
Deferred revenue 3,368 2,722
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13,875 11,808
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LONG-TERM DEBT AND OTHER LIABILITIES 1,127 1,725
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NON-RECOURSE NOTES PAYABLE, net of current maturities 6,194 4,455
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STOCKHOLDERS' EQUITY
Common stock 81 80
Additional paid in capital 27,812 27,698
Retained earnings 2,942 717
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30,835 28,495
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Total liabilities and stockholders' equity $ 52,031 $ 46,483
================= ====================
</TABLE>
<PAGE>
P&L
TECHFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues:
Services $ 9,187 $ 8,268 $ 28,008 $ 24,883
Hardware 5,232 6,624 19,216 20,735
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Total revenues 14,419 14,892 47,224 45,618
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Direct costs:
Services 6,700 5,136 19,314 17,175
Hardware 3,331 4,669 12,745 14,483
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Total direct costs 10,031 9,805 32,059 31,658
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Gross Margin:
Services 2,487 3,132 8,694 7,708
Hardware 1,901 1,955 6,471 6,252
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Total gross margin 4,388 5,087 15,165 13,960
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Operating costs
Selling and marketing 2,230 2,307 6,952 7,082
Research and development 313 364 942 1,248
General and administrative 1,341 999 3,736 3,211
Non recurring expense from restructuring - - - 244
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3,884 3,670 11,630 11,785
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Operating income 504 1,417 3,535 2,175
Interest (income) expense, net (8) 29 49 256
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Income before taxes 512 1,388 3,486 1,919
Provision for income taxes (180) (524) (1,261) (656)
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Net income $ 332 $ 864 $ 2,225 $ 1,263
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Net income per common share $ 0.04 $ 0.10 $ 0.27 $ 0.15
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Weighted average common
shares outstanding 8,472,620 8,338,863 8,375,173 8,338,863
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</TABLE>
Page 1
<PAGE>
TECHFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
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1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $2,225 $1,263
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,893 2,384
Changes in operating assets and liabilities 3,159 (1,115)
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Net cash provided by operating activities 8,277 2,461
Cash Flows from investing activities
Purchase of property and equipment (6,316) (4,359)
Investment in sales type leases (2,863) (5,910)
(Purchase of) Sale of Investments (1,835) 9,152
Purchase of Other Assets (120) (71)
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Net cash used in investing activities (11,134) (1,188)
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Cash flows from financing activities
Borrowings under revolving credit facilities -- 1,290
Issuance (repayment) of Capital leases, long-term
debt, and non-recourse notes payable 1,418 (1,430)
Issuances of Common Stock, net 115 25
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Net cash provided by (used in) financing activities 1,533 (115)
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Net (decrease) increase in cash and cash equivalents (1,324) 1,229
Cash and cash equivalents, beginning of period 3,943 565
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Cash and cash equivalents, end of period $2,619 $1,794
============ =============
</TABLE>
<PAGE>
TECHFORCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. NATURE OF BUSINESS
TechForce Corporation and subsidiaries (collectively, the "Company" and
formerly TechForce, a Georgia general partnership) are engaged in the
sale, design, on-site installation and maintenance, and support of
computer and data communications networking equipment.
2. BASIS OF FINANCIAL REPORTING
The condensed consolidated financial statements at September 30, 1997 and
for the three month and the nine month periods then ended are unaudited
and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for fair
presentation of the financial position and operating results for the
interim period. The condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Annual
Report to Shareholders incorporated by reference in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.
3. MAJOR CUSTOMERS
During the quarters ended September 30, 1997, and September 30, 1996, the
following customers individually accounted for more than 10% of the
Company's revenue:
<TABLE>
<CAPTION>
Quarter Ended September 30, 1997 Quarter Ended September 30, 1996
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Amount ($000) Percentage Amount ($000) Percentage
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Packard Bell Electronics, Inc. $ 2,886 20% $ 2,570 17%
Federal Express N/A N/A $ 1,811 12%
</TABLE>
The loss of revenues from Packard Bell could have a material impact on the
results of the operations of the Company in the near term.
4. LEGAL MATTERS
From time to time, the Company is involved in certain litigation and
claims arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of any such matters will not have a
material adverse effect on the Company's financial position at September
30, 1997 or results of operations for the nine months then ended.
<PAGE>
5. Certain amounts included in the 1996 financial statements have been
reclassified to conform with the 1997 financial statements.
6. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(EPS). SFAS 128 establishes new standards for computing and presenting
EPS. Specifically, SFAS 128 replaces the presentation of primary EPS with
a presentation of basic EPS, requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with
complex capital structures, and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997;
earlier application is not permitted. Management has determined that the
adoption of SFAS 128 will not have a material effect on the accompanying
financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 requires that a
public business enterprise report financial and descriptive information
about its reportable operating segments and related information. SFAS 131
is effective for financial statements relating to periods beginning after
December 15, 1997. The effects of SFAS 131 on the Company have not been
considered at this time.
Other issued but not yet required FASB standards are not currently
applicable or material to the Company's operations.
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The Company provides network support services focusing on mission critical
technologies such as LAN/WAN internetworking, data networking, mainframe channel
networking and workstation support. The Company's support solutions include
network monitoring services, 7X24 diagnostic and technical support from the
Technology Support Center in Clearwater, Florida, on-site maintenance, remote
and on-site equipment software installation and network design on complex multi-
vendor enterprise networks. The Company's maintenance contracts with customers
range from one to five years. The Company also sells and leases various data
network hardware supplied by other manufacturers, as well as its own channel
extension hardware. Field service operations are conducted through a
combination of the Company's field support personnel and a network of authorized
service providers that are certified by the Company to provide local on-site
repair or parts replacement services under the direction of the Company's
Technical Support Center.
Revenues from service and maintenance contracts are either recognized
ratably over the contract period or on a per call basis, as is the case under
the Company's workstation support agreements. Revenues from product sales are
recognized at the time of shipment. When appropriate, revenues from leasing are
accounted for as sales-type leases where the present value of all payments are
recorded currently as revenues and the related costs of the equipment less the
present value of any appropriate unguaranteed residual value are recorded as
cost of sales. The associated interest income is recognized over the term of
the lease. Revenues derived from sales-type leases for the three months ended
September 30, 1997 and September 30, 1996, respectively were $0.7 million and
$2.4 million. Interest income on sales-type leases totaled $0.1 million and
$0.2 million for the three month periods ended September 30, 1997 and September
30, 1996, respectively.
Management anticipates that revenues from its proprietary channel extension
products and services will gradually decrease over the next few years at a rate
of approximately 10% to 20% per year primarily as a result of a trend toward
open-systems environments. Management does not believe that this gradual
decline in such revenues will have a material adverse effect on the Company's
results of operations and financial condition.
Revenues from Packard Bell represented 20% of total Company revenues for
the three months ended September 30, 1997 as compared to 17% for the three
months ended September 30, 1996. The call volume level for the three months
ended September 30, 1997 may not be indicative of future call volumes due to
changes made by Packard Bell in its end user product warranty.
Packard Bell is invoiced monthly and payment is due 30 days after the
invoice date. The Company typically receives payment from Packard Bell
approximately 60 days after the billing date. In light of the substantial amount
of the Company's total revenues that are attributable to Packard Bell, failure
to receive payment in accordance with past practice under the Packard Bell
contract could have a material adverse effect on the Company's cash flow.
Revenues from FedEx decreased during the three and nine months ended
September 30, 1997 as compared to the same periods in 1996 due to lower repair
volumes resulting from the introduction of upgraded technology by FedEx which
experiences a lower failure rate than the replaced technology. The Company had
previously experienced above-average margins from the repair of the units which
FedEx replaced. Consequently, margins from the remaining repair business from
FedEx decreased significantly as a result of the decreased volume of higher
margin repair services. During the three months ended September 30, 1997 the
Company discontinued its repair business for FedEx. Revenues and operating
losses from this repair business for the three months ended September 30, 1997
were $144,000 and $(138,000), respectively, as compared to revenues and
operating income for the three
<PAGE>
months ended September 30, 1996 of $1.2 million and $596,000 respectively. As of
November 12, 1997 the Company continues to provide temporary labor to FedEx
pursuant to a contract which terminated during the three months ended September
30, 1997. Although the Company has submitted a bid to FedEx to continue to
provide these services, there can be no assurance that FedEx will renew its
contract with the Company. Revenues from this contract were $0.4 million and
$0.6 million for the three months ended September 30, 1997 and 1996,
respectively and $1.2 million and $1.5 million for the nine months ended
September 30, 1997 and 1996, respectively. Operating margins from this contract
are below the Company's average margins. Management does not believe that the
decline or discontinuation of revenues from this contract would have a material
adverse effect on the Company's results of operations and financial condition.
Continued growth of the Company's customer base and its services can be
expected to continue to place a significant strain on its administrative,
operational and financial resources. The Company's future performance and
profitability will depend in part on its ability to continue to increase the
number and productivity of its channels to market, to successfully implement
enhancements to its business management systems and to adapt those systems as
necessary to respond to changes in its business. Furthermore, although the
Company has experienced rapid growth in total revenues and has previously been
profitable, its limited operating history makes the prediction of future
operating results difficult. There can be no assurance that the Company's
revenue growth will continue in the future or that profitable operating results
can be sustained.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
SFAS 128 establishes new standards for computing and presenting EPS.
Specifically, SFAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS, requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures, and requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997; earlier application is not permitted.
Management has determined that the adoption of SFAS 128 will not have a material
effect on the accompanying financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments and related information. SFAS 131 is effective
for financial statements relating to periods beginning after December 15, 1997.
The effects of SFAS 131 on the Company have not been considered at this time.
Other issued but not yet required FASB standards are not currently
applicable or material to the Company's operations.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Total revenues. Total revenues decreased 3.5% from $14.9 million for the
three months ended September 30, 1996 to $14.4 million for the three months
ended September 30, 1997 due to decreased revenues from hardware sales and
leasing activity and decreased repair service revenues from FedEx partially
offset by increased enterprise network support and workstation support revenues.
Service revenues. Revenues from services increased 11.1% from $8.3
million (55.5% of total revenues) for the three months ended September 30, 1996
to $9.2 million (63.7% of total revenues) for the three months ended September
30, 1997. This increase was attributable to increased service revenues
associated with the Company's enterprise network support services and increased
workstation support revenues partially offset by a decrease in revenue from
services provided to FedEx. Revenues from enterprise network support services
increased by 20.7% while revenues from workstation support increased by 50.2%
and revenues from FedEx decreased by 70.7% for the three months ended September
30, 1997 as compared to revenues from these services for the three months ended
September 30, 1996. Revenues from FedEx decreased due to lower repair volumes
resulting from the introduction of upgraded
<PAGE>
technology by FedEx which experiences a lower failure rate than the replaced
technology. The Company had previously experienced above-average margins from
the repair of the units which FedEx replaced. Consequently, margins from the
remaining repair business from FedEx decreased significantly as a result of the
decreased volume of higher margin repair services. During the three months ended
September 30, 1997 the Company discontinued its repair business for FedEx.
Revenues and operating losses from this repair business for the three months
ended September 30, 1997 were $0.1 million and ($0.1) million, respectively, as
compared to revenues and operating income for the three months ended September
30, 1996 of $1.2 million and $0.6 million respectively. For the three months
ended September 30, 1997 as compared to the same period in 1996, the Company
experienced a decrease in revenues from its proprietary channel extension
support business in line with its previously stated expectations.
Hardware revenues. Revenues from hardware products decreased 21.0% from
$6.6 million (44.5% of total revenue) for the three months ended September 30,
1996 to $5.2 million (36.3% of total revenues) for the three months ended
September 30, 1997 due to a decrease in the volume of lease activity. Hardware
revenues included revenues from leasing activities of $2.4 million and $0.7
million for the three months ended September 30, 1996 and 1997, respectively.
Cost of Service. Cost of service increased 30.5% from $5.1 million (62.1%
of service revenues) for the three months ended September 30, 1996 to $6.7
million (72.9% of service revenues) for the three months ended September 30,
1997. This overall cost of service increase was unfavorably affected by the
reduction in and discontinuation of FedEx repair business volumes and increased
cost related to enterprise service delivery.
Cost of Hardware. Cost of hardware decreased 28.7% from $4.7 million (70.5%
of hardware revenues) for the three months ended September 30, 1996 to $3.3
million (63.7% of hardware revenue) for the three months ended September 30,
1997. This decrease was caused primarily by lower hardware revenues combined
with improved hardware margins during the three months ended September 30, 1997.
Gross Margin. Overall gross margin decreased 13.7% from $5.1 million
(34.2% of total revenues) for the three months ended September 30, 1996 to
$4.4 million (30.4% of total revenues) for the three months ended September 30,
1997. Gross margin on services decreased 20.6% from $3.1 million for the three
months ended September 30, 1996 to $2.5 million for the three months ended
September 30, 1997, while decreasing as a percent of service revenues from 37.9%
to 27.1% respectively, due primarily to the decrease in FedEx repair business
discussed above. Gross margin on hardware revenues decreased 2.8% from $2.0
million for the three months ended September 30, 1996 to $1.9 million for the
three months ended September 30, 1997. This decrease was caused primarily by
decreased hardware revenues partially offset by improved margins from sales of
hardware during the three months ended September 30, 1997. Hardware margins as a
percentage of hardware revenues increased from 29.5% for the three months ended
September 30, 1996 to 36.3% for the three months ended September 30, 1997
primarily as a result of these factors. The Company has experienced competitive
pressure on resale hardware margins and anticipates continued pressure due to
price competition.
Selling and Marketing Expenses. Selling and marketing expenses decreased
3.3% from $2.3 million (15.5% of total revenues) for the three months ended
September 30, 1996 to $2.2 million (15.5% of total revenues) for the three
months ended September 30, 1997. This decrease is in line with decreased total
revenues and was favorably affected by selling cost improvements initiated by
the Company for 1997.
Research and Development Expenses. Research and development expenses
decreased 14.0% from $0.4 million (2.4% of total revenues) for the three months
ended September 30, 1996 to $0.3 million (2.2% of total revenues) for the three
months ended September 30, 1997 primarily due to internal business systems
support expenses now being reported together with general and administrative
expenses.
General and Administrative Expenses. General and administrative expenses
increased 34.2% from $1.0 million for the three months ended September 30, 1996
to $1.3 million for the three months ended September 30, 1997. This increase
included internal business systems support expenses reported together with
general and administrative expenses for the 1997 period.
<PAGE>
Operating Income. Operating income decreased 64.4% from $1.4 million
(9.5% of total revenues) for the three months ended September 30, 1996 to $0.5
million (3.5% of total revenues) for the three months ended September 30, 1997
as a result of the factors listed above.
Interest (Income) Expense, Net. Net interest expense totaled $29,000 for
the three months ended September 30, 1996, resulting from interest on the
company's line of credit. Net interest income totaled $8,000 for the three
months ended September 30, 1997, due to an increased average investment balance
and no outstanding balance on the line of credit.
Income Taxes. The Company's effective income tax rate was 35.2% for the
three months ended September 30, 1997, as compared to a 37.8% effective income
tax rate for the three months ended September 30, 1996. The lower rate for 1997
was principally the result of higher non-taxable interest income and a prior
year income tax refund.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Total revenues. Total revenues increased 3.5% from $45.6 million for the
nine months ended September 30, 1996 to $47.2 million for the nine months ended
September 30, 1997 due to increased revenues from enterprise network support and
workstation support revenues partially offset by a decrease in hardware revenues
and service revenues from FedEx.
Service revenues. Revenues from services increased 12.6% from $24.9
million (54.5% of total revenues) for the nine months ended September 30, 1996
to $28.0 million (59.3% of total revenues) for the nine months ended September
30, 1997. This increase was attributable to increased service revenues
associated with the Company's enterprise network support services and increased
workstation support revenues offset by a decrease in revenue from services
provided to FedEx. Revenues from enterprise network support services partially
increased by 24.5% while revenues from FedEx decreased by 44.3% and revenues
from workstation support increased by 28.2% for the nine months ended September
30, 1997 as compared to revenues from these services for the nine months ended
September 30, 1996. Revenues from FedEx decreased due to lower repair volumes
resulting from the introduction of upgraded technology by FedEx which
experiences a lower failure rate than the old replaced technology. The Company
had previously experienced above-average margins from the repair of the units
which FedEx replaced. Consequently, margins from the remaining repair business
from FedEx decreased significantly as a result of the decreased volume of higher
margin repair services. During the third quarter the Company discontinued its
repair business for FedEx. Revenues and operating income from this repair
business for the nine months ended September 30, 1997 were $1.6 million and $0.1
million, respectively, as compared to revenues and operating income for the nine
months ended September 30, 1996 of $3.5 million and $1.7 million, respectively.
For the nine months ended September 30, 1997 as compared to the same period in
1996, the Company experienced a decrease in revenues from its proprietary
channel extension support business in line with its previously stated
expectations.
Hardware revenues. Revenues from hardware decreased 7.3% from $20.7
million for the nine months ended September 30, 1996 (45.5% of total revenue) to
$19.2 million for the nine months ended September 30, 1997 (40.7% of total
revenues). Hardware revenues included revenues from leasing activities of $9.6
million and $5.1 million for the nine months ended September 30, 1996 and
September 30, 1997, respectively.
Cost of Service. Cost of service increased 12.5% from $17.2 million (69.0%
of service revenues) for the nine months ended September 30, 1996 to $19.3
million (69.0% of service revenues) for the nine months ended September 30,
1997 due to increased service revenues.
Cost of Hardware. Cost of hardware decreased 12.0% from $14.5 million
(69.8% of hardware revenues) for the nine months ended September 30, 1996 to
$12.7 million (66.3% of hardware revenue) for the nine months ended September
30, 1997. This decrease was caused primarily by lower hardware revenues and
lower than average costs
<PAGE>
associated with the sales of used equipment which yielded higher margins during
the nine months ended September 30, 1997.
Gross Margin. Overall gross margin increased 8.6% from $14.0 million (30.6%
of total revenues) for the nine months ended September 30, 1996 to $15.2 million
(32.1% of total revenues) for the nine months ended September 30, 1997. Gross
margin on services increased 12.8% from $7.7 million for the nine months ended
September 30, 1996 to $8.7 million for the nine months ended September 30, 1997,
while remaining constant as a percent of service revenue at 31.0%. Gross margin
on hardware revenues increased 3.5% from $6.3 million for the nine months ended
September 30, 1996 to $6.5 million for the nine months ended September 30, 1997.
This increase was caused primarily by increased revenues and margins from sales
of used equipment. Hardware margins as a percentage of hardware revenues
increased from 30.2% for the nine months ended September 30, 1996 to 33.7% for
the nine months ended September 30, 1997 primarily as a result of these factors.
The Company has experienced competitive pressure on new resale hardware margins
and anticipates continued pressure due to price competition.
Selling and Marketing Expenses. Selling and marketing expenses decreased
1.8% from $7.1 million (15.5% of total revenues) for the nine months ended
September 30, 1996 to $7.0 million (14.7% of total revenues) for the nine months
ended September 30, 1997. This decrease reflects selling cost improvements
initiated by the Company for 1997.
Research and Development Expenses. Research and development expenses
decreased 24.5% from $1.3 million (2.7% of total revenues) for the nine months
ended September 30, 1996 to $1.0 million (2.0% of total revenues) for the nine
months ended September 30, 1997 primarily due to internal business systems
support expenses now being reported together with general and administrative
expenses.
General and Administrative Expenses. General and administrative expenses
increased 16.4% from $3.2 million (7.0% of total revenues) for the nine months
ended September 30, 1996 to $3.7 million (7.9% of total revenues) for the nine
months ended September 30, 1997. This increase included business systems
support expenses reported together with general and administrative expenses for
the 1997 period.
Non recurring expenses. Non recurring restructuring expenses were $0.2
million for the nine months ended September 30, 1996. The Company incurred no
such expenses for the nine months ended September 30, 1997.
Operating Income. Operating income increased 62.5% from $2.2 million (4.8%
of total revenues) for the nine months ended September 30, 1996 to $3.5 million
(7.5% of total revenues) for the nine months ended September 30, 1997 as a
result of the factors listed above.
Interest (Income) Expense, Net. Net interest expense decreased from
$256,000 for the nine months ended September 30, 1996 to $49,000, for the nine
months ended September 30, 1997, due primarily to lower interest expense on the
Company's reduced use of its line of credit combined with increased interest
income on higher average investments.
Income Taxes. The Company's effective income tax rate was 36.2% for the
nine months ended September 30, 1997, as compared to 34.2% in the same period
of the prior fiscal year. The lower 1996 rate was principally the result of
higher non-taxable interest income as a percentage of pre-tax income.
Liquidity and Capital Resources
The Company's operating activities provided cash of $2.5 million and $8.3
million for the nine months ended September 30, 1996 and 1997, respectively.
Cash provided by operating activities for the 1996 period was primarily due to
net income before depreciation and amortization, decreases in accounts
receivable and increases in deferred revenue offset by increases in inventory
and other current assets. Cash provided by operating activities for the 1997
period was primarily due to income before depreciation and amortization,
increases in accounts payable and deferred revenue and reductions in accounts
receivable and inventory.
<PAGE>
The Company's investing activities used cash of $1.2 million and $11.1
million for the nine months ended September 30, 1996 and 1997, respectively.
Cash used by the Company's investing activities for the 1996 period related to
the sale of investments, offset by the purchase of property and equipment as
well as increases in investment of sales-type leases. Cash used in the
Company's investing activities for the 1997 period resulted from the purchase of
investments, property, and equipment, as well as increases in investment of
sales-type leases.
Financing activities used cash of $0.1 million for the nine months ended
September 30, 1996 for the repayment of long term debt partially offset by cash
provided by net new short term revolving credit facility borrowings. Financing
activities provided cash of $1.5 million for the nine months ended September 30,
1997, primarily due to the issuance of non-recourse notes payable for discounted
leases, and the issuance of common stock under the Employee Stock Purchase Plan.
The Company's cash requirements have been financed with cash flow from
operations and borrowings under its revolving credit facility with First Union
National Bank of Florida (the "Bank") since October 1996. The credit facility
with the Bank provides for borrowings of up to $15.0 million based on the value
and aging of the Company's eligible accounts and lease receivables. Borrowings
under the line of credit bear interest at the Bank's quoted variable base rate,
which has ranged from 7.13% to 7.19% during the three months ended September 30,
1997, and was 7.16% as of September 30, 1997. As of September 30, 1997, the
Company had no outstanding balance under the line of credit and approximately
$7.8 million was available for borrowing thereunder based upon the Company's
qualifying accounts receivables. The Company intends to use its borrowing
capacity under the line of credit on a limited basis primarily for working
capital requirements. The credit facility expires in September 1998. Although
there can be no assurances that the Bank will do so, the Company believes that
the Bank will agree to renew the facility.
The Company believes that leasing provides a key competitive advantage in
the sale of long term support agreements. In addition, the Company views
leasing as a source of low cost future replacement spares inventories which can
be deployed to reduce future capital commitments for enterprise network support
contracts. As of September 30, 1997, the Company's investment in capital leases
included $8.7 million of leases which had been discounted via non-recourse notes
payable to banks. An additional $7.2 million represented undiscounted leases, a
portion of which the Company expects to discount in the near future. This
leasing activity places demands on the Company's working capital based on the
timing and availability of discounting activities with financial institutions.
The Company intends to relocate its joint corporate headquarters and
operations facility to a new location in the first quarter of 1998. In
conjunction with this move, the company has committed to a 60 month premise
lease in Clearwater, Florida, and anticipates total capital expenditures for
tenant improvements, furniture, and equipment of approximately $1.0 million. The
Company does not currently have any other material commitments for capital
expenditures.
Management believes that cash from operations and borrowings available
under its revolving credit facility together with current cash balances will be
sufficient to finance its working capital needs and capital expenditure
requirements for at least the next 12 months. Although no assurance can be
given, management believes that cash from operations together with available
sources of financing, including additional bank debt, will be sufficient to fund
the company's capital requirements for the foreseeable future beyond such 12
month period.
The above "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors. Among such risks and uncertainties are as those relating to the
competitive nature of the TechForce's marketplace and its ability to expand its
customer base and grow revenues in line with previous experience, dependence
upon certain key personnel, the Company's ability to manage its growth, and the
risk of economic and market factors affecting TechForce or its customers.
Item 3. Quantitative and Qualitative Disclosures About Market Risks.
<PAGE>
Not Applicable.
<PAGE>
PART II OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Shareholders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
----------- -----------
10.1 Transfer of Federal Express Services Agreement,
dated as of September 26, 1997, by and between
TechForce Corporation and ATS Telephone & Data
Systems, Inc.
10.2 Premise Lease, dated March 12, 1997, with
addendum dated September 30, 1997, by and
between TechForce Corporation and Pinellas Bay
Vista Partners, Ltd.
11.1 TechForce Corporation and Subsidiaries
Computation of Earnings Per Share of Common
Stock.
27 Summary Financial Data
(b) No reports on Form 8-K were filed during the period.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHFORCE CORPORATION
Date: November 13, 1997 /s/ Jerrel W. Kee
------------------------
Jerrel W. Kee
Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO.
- -----------
10.1 Transfer of Federal Express Services Agreement,
dated as of September 26, 1997, by and between
TechForce Corporation and ATS Telephone & Data
Systems, Inc.
10.2 Premise Lease, dated March 12, 1997, with addendum
dated September 30, 1997, by and between TechForce
Corporation and Pinellas Bay Vista Partners, Ltd.
11.1 TechForce Corporation and Subsidiaries Computation
of Earnings Per Share of Common Stock.
27 Summary Financial Data
<PAGE>
EXHIBIT 10.1
TRANSFER AGREEMENT
THIS TRANSFER AGREEMENT (the "Agreement") is entered into as of September
26, 1997 (the "Effective Date"), by and between ATS Telephone & Data Systems,
Inc., a Tennessee corporation ("ATS"), and TechForce Corporation, a Georgia
corporation ("Seller").
BACKGROUND
----------
Seller owns or leases certain equipment and assets which are used by Seller
to fulfill its obligations to Federal Express Corporation ("Fed-Ex") under that
certain Services Agreement, dated November 1, 1994, by and between Seller and
Fed-Ex, which obligations involve the service and repair of certain equipment
owned or leased by Fed-Ex (the service and repair activities performed by Seller
are referred to herein as the "Fed-Ex Repair Business").
ATS desires to purchase certain of the assets related to the Fed-Ex Repair
Business from Seller and Seller desires to sell certain assets to ATS as
provided herein.
The parties agree as follows:
1. Transfer. Seller hereby sells, assigns and transfers to ATS all of its
--------
right, title and interest in and to the following assets used or usable in
connection with the Fed-Ex Repair Business:
(a) Equipment and other Tangible Property. All of the equipment, supplies
-------------------------------------
and other tangible personal property owned by Seller being used in the operation
of the Fed-Ex Repair Business listed on Schedule 1(a)(1) under the section
----------------
entitled "To be retained by ATS" (the "Support Equipment").
(b) Personal Property Leases. All leasehold interests in the vehicle
------------------------
leased by Seller under that certain Vehicle Lease Service Agreement by and
between Seller and Penske Truck Leasing Co. and the other leasehold interests in
personal property used by Seller in the operation of the Fed-Ex Repair Business
(the "Personal Property Leases") and listed or described on Schedule 1(b).
-------------
2. Transfer Fee.
------------
(a) Cash Payment. ATS shall pay Seller the sum of Fifteen Thousand One
------------
Hundred Twenty-Five and No/100 Dollars ($15,125.00) in cash or by bank check in
four equal monthly installments beginning on the Effective Date and continuing
on the first (1st) day of each calendar month after the Effective Date.
(b) Revenue Share Payment. For each month commencing with the month
---------------------
immediately following the Effective Date, ATS shall also pay to Seller an amount
(the "Revenue Share Payment") equal to a certain percentage (the "Applicable
Percentage Share") of the gross revenues derived from and attributable to the
Fed-Ex Repair Business and any other services performed by ATS during the term
of this Agreement for third parties referred to ATS by TechForce (the "Gross
Revenue Amount") as computed in accordance with Schedule 2(b). The Applicable
-------------
Percentage Share used to calculate the Revenue Share Payment shall be as set
forth on Schedule 2(b) and the Revenue Share Payment shall be due and payable on
-------------
the fifth (5th) business day of the calendar month immediately following the
month in which the Gross Revenue Amount was earned.
<PAGE>
(c) Referral Obligation. In addition to its other obligations hereunder,
-------------------
Seller agrees during the term of the Agreement to refer to ATS third parties who
contact Seller desiring to procure services substantially similar to the
services to be performed by ATS for Fed-Ex at the time that this Agreement is
consummated. The foregoing obligation shall only apply if Seller chooses not to
provide the services on behalf of or to such third party itself and instead
elects to refer such third party to an independent service provider. Seller
shall not be liable to ATS if such third party refuses to use ATS or elects to
use another service provider to satisfy such third party's requirements.
3. Assumption of Liabilities and Related Matters.
---------------------------------------------
(a) Executory Obligations to be Assumed by ATS. In addition to the
------------------------------------------
Transfer Fee, ATS agrees to assume and to pay and/or perform, in accordance with
their respective terms and from and after the Effective Date, (a) sales taxes
and period expenses for periods from and after the Effective Date; and (b) the
executory obligations or commitments of Seller (but only to the extent such
obligations or commitments relate to a time after the Effective Date) under the
Personal Property Leases.
(b) Indemnification. ATS and Seller further acknowledge and agree that ATS
---------------
is purchasing the Support Equipment from Seller for its use in providing the
support services described herein to Fed-Ex and certain other customers of
Seller. As a further inducement to Seller, ATS agrees to indemnify Seller with
respect to, and hold Seller harmless from any liability, costs, expenses or
attorneys' fees relating to or arising out of the provision of such support
services to Seller's customers including, but not limited to, tort and contract
claims brought by such customers for services performed by ATS from and after
the Effective Date. Seller agrees to indemnify and hold harmless ATS from any
liability relating to or arising out of the provision of support services to
Seller's customers prior to the Effective Date.
(c) No Other Liabilities to be Assumed. Other than as set forth in Section
---------------------------------- -------
3(a), ATS shall not assume, and nothing contained in this Agreement shall be
- ----
construed as an assumption by ATS of, any liabilities, obligations, expenses or
undertakings of Seller of any nature whatsoever, whether fixed or contingent,
known or unknown.
4. Representations and Warranties of Seller.
----------------------------------------
Except as set forth in the disclosure letter attached hereto from Seller to
ATS (the "Disclosure Letter"), Seller represents and warrants on the Effective
Date that:
(a) Organization and Standing. Seller is a corporation duly organized,
-------------------------
validly existing and in good standing under the laws of the State of Georgia,
and has all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement.
(b) Corporate Authorization and No Conflict. The execution and delivery of
---------------------------------------
this Agreement and any other documents contemplated by this Agreement and the
Disclosure Letter furnished in connection herewith by or on behalf of Seller,
and the consummation of the transactions contemplated herein or therein, have
been duly authorized by all necessary corporate action on the part of Seller,
and to the best knowledge of Seller, such execution, delivery and consummation
of the transactions contemplated hereunder and thereunder shall not result in
any violation or breach of any contract, trust, document or instrument to which
Seller is a party or by which any of its property is bound. This Agreement has
been duly executed by Seller and is the valid and legally binding obligation of
Seller enforceable against it in accordance with its respective terms, except as
limited by the exercise of judicial discretion, bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
-2-
<PAGE>
generally the enforcement of creditors' rights, and except as the remedy of
specific performance may be unavailable in certain cases.
(c) Approvals. No approval, authorization, order, license or consent of or
---------
registration, qualification or filing with any governmental authority and no
approval or consent by any other person or entity is required in connection with
the execution, delivery or performance by Seller of this Agreement and the other
agreements contemplated hereby.
(d) No Liens or Encumbrances. Except as set forth in the Disclosure
------------------------
Letter, Seller has good and marketable title to all of the Support Equipment,
free from any and all claims, liens, pledges, mortgages, security interests,
charges, options, defaults, restrictions or encumbrances of any nature
whatsoever. Seller has obtained all permissions and consents necessary for the
transfer and assignment of the Support Equipment to ATS, and ATS is not and
shall not become liable for any payment to any third party as a result of any
such transfer and assignment.
(e) Condition of Tangible Support Equipment. All of the tangible Support
---------------------------------------
Equipment listed on Schedule 1(a)(1) is currently in good order and repair,
----------------
normal wear and tear excepted. EXCEPT AS SET FORTH HEREIN, SELLER MAKES NO
WARRANTIES OR REPRESENTATIONS AS TO THE SUPPORT EQUIPMENT, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND THE SUPPORT EQUIPMENT IS TRANSFERRED TO ATS "AS IS" AND
WHERE IS.
5. Representations and Warranties of ATS.
-------------------------------------
ATS hereby represents and warrants to Seller on the Effective Date as
follows:
(a) Organization and Standing. ATS is a corporation duly organized,
-------------------------
validly existing and in good standing under the laws of the State of Tennessee,
and has all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement.
(b) Corporate Authorization and No Conflict. The execution and delivery of
---------------------------------------
this Agreement on behalf of ATS, and the consummation of the transactions
contemplated hereunder have been duly authorized by all necessary corporate
action on the part of ATS, and, to the best of ATS's knowledge, such execution,
delivery and consummation of the transactions contemplated hereunder and
thereunder will not result in a violation or breach of any document or
instrument to which ATS is a party or by which any of its property is bound.
This Agreement has been duly executed by ATS and is the valid and legally
binding obligation of ATS enforceable against it in accordance with its terms,
except as limited by the exercise of judicial discretion, bankruptcy,
insolvency, reorganization, moratorium or similar law relating to or affecting
generally the enforcement of creditors' rights, and except as the remedy of
specific performance may be unavailable in certain cases.
(c) Approvals. No approval, authorization, order, license or consent of or
---------
registration, qualification or filing with any governmental authority and no
approval or consent by any other person or entity is required in connection with
the execution, delivery or performance by ATS of this Agreement and the
agreements contemplated hereby.
6. Additional Covenants.
--------------------
(a) Prorations. All personal property taxes on the Support Equipment, all
----------
payments in lieu of taxes on the Support Equipment and other taxes applicable
thereto, if any, and payments under leases
-3-
<PAGE>
and licenses included in the Support Equipment and all utility and other period
charges shall be pro rated between Seller and ATS as of the Effective Date.
(b) Request for Consent to Assignments. Seller agrees to request that the
----------------------------------
parties to the Personal Property Leases consent to the assignment of the right,
title and interest of Seller under such agreements to ATS. ATS agrees that the
receipt of such consents is not a condition to its obligations under this
Agreement, that the failure to obtain such consents is not a breach of any
representation, warranty or obligation of Seller under this Agreement and that
ATS may have to negotiate new agreements with any such parties at the discretion
of such parties.
(c) Employees of the Fed-Ex Repair Business. ATS shall offer employment to
---------------------------------------
certain current employees of Seller set forth on Schedule 6(c) on terms and
-------------
conditions as are comparable to ATS's general employment and hiring policies and
procedures. Seller shall remain solely responsible for all salaries, wages,
benefits, severance arrangements and all other terms of employment for each such
person who may become an employee of ATS accruing prior to the Effective Date.
(d) Accounts Receivable. ATS shall promptly remit to Seller any and all
-------------------
accounts receivables which may be received by ATS from Fed-Ex after the
Effective Date which had accrued on or prior to the Effective Date.
7. Term. The term of this Agreement shall commence on the Effective Date
----
and shall terminate on the last day of the eighteenth (18th) calendar month
after the Effective Date.
8. Arbitration. The parties hereto agree that all disputes, claims or
-----------
causes of action arising out of or relating to this Agreement, or the validity,
interpretation, breach, violation, or termination thereof shall be finally and
solely determined and settled by arbitration to be conducted in Memphis,
Tennessee in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") in effect on the Effective Date. Arbitration
may not be demanded after the date on which the institution of legal or
equitable proceedings based on the controversy or claim would be barred by the
applicable statute of limitation. If the terms and conditions of this Agreement
are inconsistent with the Commercial Arbitration Rules of the AAA, the terms and
conditions of this Agreement shall control. The prevailing party in any
arbitration arising out of this Agreement shall be reimbursed for all reasonable
costs and expenses incurred in such proceeding, including reasonable attorneys'
fees.
9. Miscellaneous.
-------------
(a) Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of and be enforceable against the parties hereto and their respective
successors and permitted assigns.
(b) Notices. All notices shall be in writing and shall be deemed validly
-------
given, made and served when delivered or faxed as follows:
If to Seller: Jerrel W. Kee
TechForce Corporation
15950 Bay Vista Drive
Clearwater, Florida 34620
Fax No.: (818) 532-3683
-4-
<PAGE>
If to ATS: ATS Telephone & Data Systems, Inc.
395 Vantech Drive, Suite 7
Memphis, TN 38115
Attn.: Steve Crowder, President
Fax No.: (901) 797-3122
(c) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties relating to the purchase and sale of the Support Equipment
and supersedes in all respects any and all prior oral or written agreements or
understandings. This Agreement shall be amended or modified only by written
instrument signed by both parties.
(d) Expenses. Except to the extent otherwise provided in this Agreement,
--------
each party shall pay for its own legal, accounting and other similar expenses
incurred in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated.
(e) Publicity. The timing and content of all public announcements relating
---------
to the execution of this Agreement shall be approved by both ATS and Seller
prior to the release of such public announcement, and each party agrees to
cooperate with the other party as appropriate to comply with all applicable
laws.
(f) Assignment. This Agreement may not be assigned by either party hereto
----------
without the prior written consent of the other party other than to any
successors, subsidiary parent corporation of a party; provided, however, that
the assignor shall remain bound under all of its obligations under this
Agreement. The rights, privileges and obligations of each party hereto shall
inure to the benefit of and be binding on the permitted assigns of such party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized representatives as of the date set forth in
the first paragraph.
ATS TELEPHONE & DATA SYSTEMS, INC.
By: Original Signed
----------------------------------------
Title:
-------------------------------------
TECHFORCE CORPORATION
By: Original Signed
----------------------------------------
Title:
-------------------------------------
-5-
<PAGE>
Schedules 1,2, and 6
Available Upon Request
<PAGE>
Exhibit 10.2
LEASE
THIS LEASE, made as of this 12th day of March 1997, by and between PINELLAS
BAY VISTA PARTNERS, LTD., hereafter called Lessor, and TECHFORCE CORPORATION,
hereafter called Lessee.
WITNESSETH
ARTICLE 1 - GRANT AND TERM
1.01 DEMISED PREMISES:
In consideration of the rents, covenants and agreements herein set forth,
Lessor hereby leases to Lessee and Lessee hereby rents from Lessor those certain
premises, hereafter called Demised Premises, containing approximately 30,000
rentable square feet of space, addressed as 5725 RIO VISTA DRIVE, CLEARWATER,
FLORIDA 34620. The actual amount of rentable space in the Leased Premises shall
be based on the final construction documents to be approved by Lessor and
Lessee.
1.02 ENTIRE PREMISES:
The building or buildings and common areas of the center are hereinafter
called the entire premises.
1.03 USE OF COMMON AREAS:
In addition to the Demised Premises, Lessee shall have access to
hereinafter defined Common Areas subject to this lease and to reasonable rules
and regulations for use thereof as prescribed from time to time by Lessor.
1.04 QUIET ENJOYMENT:
Lessee shall have the right to quiet enjoyment of the Demised Premises,
subject to the terms, conditions, and covenants of this lease.
1.05 COMMENCEMENT:
a. The Lease terms and Lessee's obligation to pay rent shall commence on
the 1st day of February, 1998, or the date Lessee opens for business, whichever
is earlier. Lessee agrees to pay $35,042.50 upon signing this Lease to cover
the first month's rent per Article 2 and security deposit per Article 4.01.
<TABLE>
<CAPTION>
Additional Sales
Base Rent Rent Tax TOTAL
<S> <C> <C> <C> <C>
First month $25,875.00 $6,875.00 $2,292.50 $35,042.50
Sec. deposit* $0.00 $0.00 $0.00 $0.00
TOTAL $35,042.50
</TABLE>
*No additional security deposit is required.
1
<PAGE>
In the event the size of the Demised Premises changes pursuant to Article
1.01, Lessee shall promptly pay Lessor any shortfall and Lessor shall credit any
overage against Lessee's next due base rent and additional rent.
b. Simultaneously with the Commencement of the Lease per Article 1.05 b., or
upon Lessee vacating 15950 Bay Vista Drive, Clearwater, Florida 34620 (the
"Existing Premises"), whichever is later, Lessor shall terminate its lease with
Lessee for the Existing Premises.
1.06 TERM:
The term shall be for a period of five (5) years, as hereinafter defined,
plus the part of a month, if any, from the date of commencement of the term to
the first day of the first full calendar month of the term.
1.07 RENEWAL OF TERM:
Upon 180 days prior written notice to Lessor, Lessee shall have two options
to renew the Lease for a period of five years each at 95 per cent of the then
prevailing market rates, escalating annually thereafter based on the increase in
the Consumer Price Index (CPI). Lessor shall provide an improvement allowance
of $3.00 per r.s.f. at the time of each such renewal.
1.08 EARLY TERMINATION:
Lessee shall have a one-time right to terminate its Lease on up to 10,000
square feet of the Demised Premises after the first three years of the term.
This right shall be subject to (a) Lessor receiving 180 days prior written
notice, (b) Lessor receiving a payment equal to (i) the unamortized costs of
tenant improvements and real estate commissions incurred by Lessor with respect
to this terminated space, and (ii) a penalty of six (6) month's rent and
operating expenses at the then current rates otherwise due for this terminated
space, (c) Lessee not having executed a lease for any other office space in the
Tampa Bay area (Hillsborough, Pinellas, Pasco, Hernando, Manatee and Sarasota
Counties) within 12 months prior to and/or subsequent to giving the 180 day
prior written notice of early termination, and (d) Lessee's reported gross
revenues for the fiscal year in which the written termination notice is given
not exceeding 200% of Lessee's gross revenues reported in fiscal year 1997,
except that this provision (d) shall not apply if Lessee has completed a
business combination with another company that creates a need for Lessee to
reduce its workforce in the Tampa Bay area.
1.09 RIGHT OF FIRST REFUSAL:
Lessor shall provide Lessee with a continuing right of first refusal on
any vacant space in the buildings during the initial term of the lease. This
right shall be subject to the prior rights granted by Lessor in writing prior to
the date of this Lease of any other tenants of the buildings. Lessee shall have
three days to accept in writing the terms of any bona fide proposal made by
Lessor to a third party for the lease of space in the buildings. Lessor shall
keep Lessee informed of the status of proposals to lease space to other tenants,
including revisions to previously provided proposals. If Lessor fails to send
Lessee any initial proposal and said proposal is accepted by a third party,
Lessee shall have ten (10) days to accept or reject such proposal after receipt
of same from Lessor.
2
<PAGE>
1.10 EXPANSION OPTION:
Lessee shall have a continuing option to expand into any vacant space in
the buildings during the initial term of the lease. This right shall be subject
to the prior rights of any other tenants of the buildings. To exercise this
right, Lessee shall provide Lessor 120 days prior written notice of the
contemplated commencement date of the lease for the expansion premises. Lessor
shall provide Lessee the expansion premises on the same terms and conditions
described in this Lease with respect to the initial premises, except that the
tenant improvement allowance described in Exhibit D shall be prorated based on
the number of months remaining in the term as of the contemplated commencement
date of the lease with respect to the expansion premises. The Base Rent and
Additional Rent due for the expansion premises shall be at the same rates as
then in effect for the initial premises, and subject to the adjustments
described in Article 2.
ARTICLE 2 - RENT
2.01 BASE RENT:
Lessee agrees to pay to Lessor as base rent for the Demised Premises the
sums shown below per month, plus all applicable sales tax.
<TABLE>
<CAPTION>
YEAR MONTHLY BASE RENT
---- -----------------
<S> <C>
1 $25,875.00
2 $26,400.00
3 $26,925.00
4 $27,450.00
5 $28,000.00
</TABLE>
Rent shall be due and payable on the first day of each calendar month without
any demand or set off or deduction whatsoever (except as herein provided), at
the office of the Lessor designated for notices. If the term shall commence
upon a day other than the first day of a calendar month, then the rent is
payable in advance for such fraction of a month until the beginning of the first
full calendar month of the term, prorated on a daily basis.
The covenants of Lessee to pay the Base Rent and the Additional Rent are
each independent of any other covenant, condition, provision or agreement
contained in this Lease. All rents are payable to Pinellas Bay Vista Partners,
Ltd.:
% Garcia Enterprises of Tampa, Inc.
15950 Bay Vista Drive, Suite 250
Clearwater, FL 34620
2.02 ADDITIONAL RENT:
Lessee is required hereunder to pay to Lessor, in each year during the term
of this Lease and any extension or renewal thereof, its proportionate share of
(a) such real estate taxes and assessments paid in the first instance by Lessor,
and (b) the annual aggregate operating expenses incurred by Lessor in the
operation, maintenance and repair of the Demised Premises and the buildings.
Lessee's proportionate share shall be the rentable square feet in the Demised
Premises divided by the total rentable square feet in the buildings, or
3
<PAGE>
36.145 percent (30,000 r.s.f. divided by 83,000 r.s.f.), or such revised share
as may result if the actual amount of rentable space is recalculated pursuant to
Article 1.01.
a. Any tax year commencing during any lease year shall be deemed to correspond
to such lease year. A copy of the tax statement submitted by Lessor to Lessee
shall be sufficient evidence of the amount of taxes and assessments assessed or
levied against the Premises of which the Demised Premises are a part, as well as
the items taxed.
b. The term "Operating Expenses" shall include but not be limited to water and
sewer, trash collection, maintenance, repair of plumbing, roofs, parking and
landscaped areas, signs, insurance premiums, property owners' association
assessments, management fees, and wages and fringe benefits of personnel
employed for such work. Expenses that are excluded from the definition of
Operating Expenses are: refinancing costs; management fees in excess of five
percent (5%) of the gross rental; administrative salaries above building
manager; advertising, promotional costs and brokerage fees; repairs or
improvements required to bring the property in compliance with federal, state,
or local codes, acts, or ordinances in effect prior to the lease commencement
date; income, franchise, and inheritance taxes; repairs of any latent defects;
the cost of any environmental remediation not resulting from Lessee's operations
at the Demised Premises.
c. The payment of the sums set forth in this Article 2.02 shall be in addition
to the Base Rent payable pursuant to Article 2.01 of this Lease. All sums due
hereunder shall be due and payable within thirty (30) days of delivery of
written certification by Lessor setting forth the computation of the amount due
from Lessee. In the event the lease term shall begin or expire at any time
during the lease calendar year, the Lessee shall be responsible for his pro rata
share of Additional Rent under subdivisions a. and b. during the Lease and/or
occupancy time.
d. Prior to commencement of this Lease, and prior to the commencement of each
calendar year thereafter during the term of this Lease or any renewal or
extension thereof, Lessor may estimate for each calendar year (i) the total
amount of Real Estate Taxes; (ii) the total amount of Operating Expenses; (iii)
Lessee's share of Real Estate Taxes for such calendar year; (iv) Lessee's share
of Operating Expenses for such calendar year; and (v) the computation of the
annual and monthly additional rental payable during such calendar year as a
result of increases or decreases in Lessee's share of Real Estate Taxes, and
Operating Expenses. Said estimates will be in writing and will be delivered or
mailed to Lessee at the Premises or other address per Article 17.02. Any
estimate shall consist of an itemized budget, and Lessor shall provide
reasonable documentation to support actual changes upon receipt of a written
request from Lessee.
e. The amount of Lessee's share of Real Estate Taxes, and Operating Expenses
for each calendar year, so estimated, shall be payable as Additional Rent, in
equal monthly installments, in advance, on the first day of each month.
f. Upon completion of each calendar year during the term of this Lease or any
renewal or extension thereof, Lessor shall cause a determination to be made of
the actual amount of the Real Estate Taxes, and Operating Expenses payable in
such calendar year and Lessee's share thereof and deliver a written
certification of the amounts thereof to Lessee. If Lessee has underpaid its
share of Real Estate Taxes, or Operating Expenses for such calendar year, Lessee
shall pay the balance of its share of same within ten (10) days after the
receipt of such statement. If Lessee has overpaid its share of Real Estate
Taxes, or Operating Expenses for such calendar year, Lessor shall either (i)
refund such excess, or (ii) credit such excess against the most current monthly
installments or installments due Lessor for its estimate of Lessee's share of
Real
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Estate Taxes, and Operating Expenses for the next following calendar year. A pro
rata adjustment shall be made for a fractional calendar year.
2.03 PAST - DUE RENT:
If the Lessee shall fail to pay within five (5) days after the same is due
and payable any rent, additional rent, or any other amounts or charges provided
for in this Lease, there shall become due and payable a late fee on the sixth
day of the month equal to 5% of the total rent due, and Lessee shall be charged
interest at the maximum rate permitted by law for each day thereafter that the
rent, additional rent, or any other amounts or charges are not paid. The Lessor
reserves the right to refuse late payments of rent, additional rent, or any
other amount or charges offered after the expiration of the Lessor's notice and
demand. The late charges are imposed to reimburse the Lessor for additional
costs in handling delinquent payments. Lessee will also be required to pay a
$30.00 fee on any check written to Lessor by Lessee which is returned non-
sufficient funds or similar wording.
2.04 INCREASES IN BASE RENT:
Starting twelve (12) months from the Commencement Date and every twelve
(12) months thereafter for the term of this Lease, the Base Rent for the
following twelve (12) months shall be that shown in Article 2.01 adjusted
according to the annual change in the Consumer Price Index (CPI) for all Urban
Consumers from the Bureau of Labor Statistics, (1982-1984-100). The "Base
Month" for such comparison shall be the month and the year of the Commencement
Date and the "Comparison Month" shall be the month and year of each subsequent
twelve month anniversary of the Commencement Date. The Base Rent shall be
adjusted by an amount in dollars proportionate to the change in the Index figure
from that of the Base Month to the Comparison Month, with a minimum CPI increase
of two and three-quarters percent (2.75%) and a maximum CPI increase of three
and one-quarter percent (3.25%). When notified of the amount of increase,
Lessee will pay the amount of increase retroactive to the effective date.
ARTICLE 3 - CONDUCT OF BUSINESS BY LESSEE
3.01 USE OF PREMISES:
The Demised Premises shall be used by Lessee solely for general office and
warehouse and support center purposes. Lessee shall not suffer nor permit any
part of the Demised Premises to be used for any other business or purpose, or by
any other person, without the prior written consent of Lessor, such consent not
to be unreasonably withheld.
3.02 GOVERNMENTAL REGULATION:
Lessee, at its expense, shall comply with all federal, state, and local
laws, ordinances, orders, rules, regulations, agreements and covenants
pertaining to any of the entire Demised Premises.
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3.03 WASTE OR NUISANCE:
Lessee shall not commit nor suffer to be committed by its employees, agents
and invitees any waste upon the Demised Premises or the entire premises nor any
nuisance or other act or thing which may disturb the quiet enjoyment of any
other tenant of the building.
ARTICLE 4 - SECURITY AND DAMAGE DEPOSIT
4.01 Lessee, in connection with its lease of the Existing Premises, has
deposited with Lessor the sum of thirteen thousand, eighty and 00/100 dollars
($13,080.00), receipt of which is acknowledged hereby by Lessor, which deposit
is to be held by Lessor, without liability for interest, as a security and
damage deposit for the faithful performance by Lessee during the term hereof or
any extension hereof. Prior to the time when Lessee shall be entitled to the
return of this security deposit, Lessor may co-mingle such deposit with Lessor's
own funds and use such security deposit for such purpose as Lessor may
determine. In the event of the failure of Lessee to keep and perform any of the
terms, covenants and conditions of this Lease during the term hereof or any
extension hereof, the Lessor, either with or without terminating this Lease, may
(but shall not be required to) apply such portion of said deposit as may be
necessary to compensate or repay Lessor for all losses or damages sustained or
to be sustained by Lessor due to such breach on the part of Lessee, including,
but not limited to overdue and unpaid rent, any other sum payable by Lessee to
Lessor pursuant to the provisions of this Lease, damages or deficiencies in the
reletting of Demised Premises, and reasonable attorney's fees incurred by
Lessor. Should the entire deposit or any portion thereof, be appropriated and
applied by Lessor in accordance with the provisions of this paragraph, Lessee
upon written demand by Lessor, shall remit forthwith to Lessor a sufficient
amount of cash to restore said security deposit to the original sum deposited,
and Lessee's failure to do so within five (5) days after receipt of such demand
shall constitute a breach of this Lease. Said security deposit shall be
returned to Lessee, less any depletion thereof as the result of the provisions
of this paragraph, at the end of the term of this Lease. Lessee shall have no
right to anticipate return of said deposit by withholding any amount required to
be paid pursuant to the provisions of this Lease or otherwise.
4.02 In the event Lessor shall sell the Premises, or shall otherwise
convey or dispose of its interest in this Lease, Lessor may assign said security
deposit or any balance thereof to Lessor's assignee, whereupon Lessor shall be
released from all liability for the return or repayment of such security deposit
and Lessee shall look solely to said assignee for the return and repayment of
said security deposit. Said security deposit shall not be assigned or
encumbered by Lessee without the written consent of Lessor, and any assignment
of encumbrance without such consent shall not bind Lessor.
ARTICLE 5 - CONTROL AND USE OF COMMON AREAS
5.01 DESCRIPTION OF COMMON AREAS:
Common Areas are all those areas and facilities including, but not limited
to parking areas, driveways, sidewalks, walkways, landscaped areas, utility and
drainage systems, utility rooms, hallways and improvements provided by the
Lessor for the general use, in common, of tenants, their officers, agents,
employees, customers, or persons having business with Lessee.
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5.02 CONTROL OF COMMON AREAS BY LESSOR:
Common Areas are subject to the exclusive control and management of Lessor,
who shall have the right from time to time to establish, modify, and enforce
reasonable rules and regulations with respect to their use. The Lessor shall
have the right to change the size and uses of Common Areas as the Lessor
desires, provided said change does not adversely affect the use of the Demised
Premises as described in Article 3.01 of this Lease. Lessor agrees to uniformly
enforce all such rules and regulations upon all occupants of the building.
ARTICLE 6 - UTILITIES
6.01 Lessee shall pay for all utilities used at the Demised Premises
except those, if any, included in Article 2.02. Lessor represents that the
utilities are sufficient to service the Demised Premises for the use specified
in Article 3.01 hereof. Lessor shall not be liable for interruption in service
resulting from any act or omission of the Lessor or any other cause whatsoever,
except where caused by the negligence of the Lessor.
6.02 The Lessor will pay for normal water consumption and sewer
charges. All other costs of water and sewer shall be paid for by Lessee.
6.03 Lessor will pay for dumpsters provided for normal use of the
Demised Premises by Lessee for the purposes described in Article 3.01. All
other costs due to excessive or abnormal use of dumpsters shall be paid by
Lessee.
6.04 Lessor will pay for electricity for the Common Areas. Electricity
for the Demised Premises shall be separately metered and Lessee shall be
responsible for paying Florida Power Co. directly for the electricity so
metered.
ARTICLE 7 - MAINTENANCE OF DEMISED PREMISES
7.01 CARE AND REPAIR OF DEMISED PREMISES:
a. Lessor warrants that heating, ventilation, air conditioning, electrical,
plumbing, structural, mechanical, and fire sprinkler equipment will be in safe
working condition and in compliance with all applicable rules, codes and
ordinances, including but not limited to the A.D.A. as of the commencement of
this Lease. Lessor shall be responsible for obtaining warranties on all new
construction and all such warranties shall inure to the benefit of Lessee.
Lessee shall, at all times throughout the term of this Lease, including
renewals, and extensions, and at its sole expense, keep and maintain the Demised
Premises in a clean, safe, sanitary, and first class condition and in compliance
with all applicable laws, codes, ordinances, rules and regulations. Lessee's
obligation hereunder shall include but not be limited to the maintenance, repair
and replacement, if necessary, of heating, air conditioning fixtures, equipment,
and systems. Lessee shall within five (5) days of occupancy, contract with a
licensed HVAC maintenance company to maintain the system in proper working order
and make repairs if necessary. The Lessee agrees to supply a copy of the
Maintenance Agreement to the Lessor and shall at all times during the term of
this Lease keep in full force a HVAC maintenance agreement. Lessee has ten (10)
days from the commencement of this Lease to notify
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Lessor of any defects in the HVAC system. If Lessee does not notify Lessor
within ten (10) days, Lessee is deemed to have accepted the premises in As Is
condition. Not withstanding the above, Lessor shall inspect the HVAC system
prior to Lessee's occupancy of the Premises and Lessor shall warrant the HVAC
system for a period of one (1) year from the scheduled Commencement date. In
addition, Lessee shall maintain, repair and replace, if necessary, all lighting
and plumbing fixtures and equipment, fixtures, motors and machinery, all
interior walls, partitions, doors and windows, including regular painting
thereof, all exterior entrances, windows, doors and the replacement of all
broken glass that are part of the Demised Premises. When used in this provision,
the term "repairs" shall include replacements or renewals when necessary, and
all such repairs made by the Lessee shall be equal in quality and class to the
original work. The Lessee shall keep and maintain all portions of the Demised
Premises and sidewalk and areas adjoining the same in a clean and orderly
condition, free of accumulation of rubbish.
b. If Lessee fails, refuses or neglects to maintain or repair the Demised
Premises as required in this Lease within 30 days (or such longer period as is
reasonably necessary to complete the required work) after notice shall have been
given Lessee, in accordance with Article 17.02 of this Lease, Lessor may make
such repairs without liability to Lessee for any loss or damage that may accrue
to Lessee's merchandise, fixtures or other property or to Lessee's business by
reason thereof, except to the extent caused by Lessor's negligence or willful
misconduct, and upon completion thereof, Lessee shall pay Lessor all reasonable
costs plus 10% for overhead incurred by Lessor in making such repair upon
presentation to Lessee. Lessor shall repair, at its expense, the structural
portions of the building, provided, however, where structural repairs are
required to be made by reason of the acts of Lessee, the costs thereof shall be
borne by Lessee and payable by Lessee to Lessor upon demand.
c. The Lessor shall be responsible for all outside maintenance of the Demised
Premises, including grounds and parking areas. All such maintenance which is
the responsibility of the Lessor shall be provided as reasonably necessary to
the comfortable use and occupancy of the Demised Premises during business hours,
except Saturdays, Sundays and holidays, upon the condition that the Lessor shall
not be liable for damages for failure to do so due to causes beyond its control.
Notwithstanding the foregoing of this subparagraph, all outside maintenance
performed by Lessor shall be deemed "operating expenses" pursuant to Article
2.02 subparagraph b. Lessor shall conduct such maintenance and repairs at such
times and in such manner as will not unreasonably interfere with Lessee's
business or use of the Demised Premises.
7.02 SIGNS (See also Exhibit C)
Lessee may place signage on the building and in compliance with Lessor's
rules and regulations in Exhibit C.
ARTICLE 8 - FIXTURES, ALTERATIONS, REPLACEMENTS
Except as hereinafter provided, Lessee shall not make any alteration,
additions, or improvements in or to the Demised Premises or add, disturb or in
any way change any plumbing or wiring therein without the prior written consent
of the Lessor, which consent shall not be unreasonably withheld or delayed. In
the event alterations are required by any governmental agency by reason of the
use and occupancy of the Demised Premises by Lessee, Lessee shall make such
alterations at its own cost and expense after first obtaining Lessor's approval
of plans and specifications therefore and furnishing such indemnification as
Lessor may reasonably require against liens, costs, damages and expenses arising
out of such alterations.
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Alterations or additions by Lessee must be built in compliance with all laws,
ordinances and governmental regulations affecting the Demised Premises and
Lessee shall warrant to Lessor that all such alterations, additions, or
improvements shall be in strict compliance with all relevant laws, ordinances,
governmental regulations, and insurance requirements. Construction of such
alterations or additions shall commence only upon Lessee obtaining and
exhibiting to Lessor the requisite approvals, licenses and permits and
indemnification against liens. All alterations, installations, physical
additions or improvements to the Demised Premises made by Lessee shall be equal
in quality or better than original installation and shall at once become the
property of Lessor and shall be surrendered to Lessor upon the termination of
this Lease; provided, however, this clause shall not apply to movable equipment
or furniture owned by Lessee which may be removed by Lessee at the end of the
term of this Lease if Lessee is not then in default, nor shall it apply to any
fixtures and improvements installed at Lessee's expense if the removal of such
fixtures and improvements (a) is completed under Lessor's strict supervision
after the plan for removal and restoration has been reviewed and approved by
Lessor in writing, in its reasonable discretion, and (b) the actual removal and
restoration is completed by Lessee in conformance with the plan approved by
Lessor and the premises are then suitable for occupancy and use by another
tenant (i.e. with no holes in partitions, no floor areas without matching carpet
or flooring materials, electrical service and HVAC service to all portions of
the Demised Premises, etc.). Lessee shall have the right to install telephone
and computer cable within the Demised Premises as long as said cabling meets all
rules, codes and ordinances. Consent for Lessee to install HVAC and other
interior equipment shall not be unreasonably withheld by Lessor as long as the
equipment does not place unreasonable loads on any building systems.
ARTICLE 9 - POSSESSION AND LIENS
9.01 POSSESSION:
Except as hereinafter provided, Lessor shall deliver possession of the
Demised Premises to Lessee in the condition required by this Lease on or before
the Commencement Date as defined in Article 1.05 hereof. Any occupancy by
Lessee prior to the beginning of the term shall in all respects be the same as
that of a Lessee under this Lease. Lessor shall have no responsibility or
liability for loss or damage to fixtures, facilities or equipment installed or
left on the Demised Premises.
9.02 LESSEE SHALL DISCHARGE ALL LIENS:
Lessee shall promptly pay all laborers and materialmen working on the
Demised Premises on his account. No laborers or materialmen shall look to the
entire premises or any portion thereof for the purpose of placing a lien thereon
for work done at Lessee's request.
ARTICLE 10 - INSURANCE AND INDEMNITY
a. Real and Personal Property Insurance.
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(1) Lessor's property. Except as noted below, Lessor shall bear all risks
-----------------
of loss or physical damage to the building, the Demised Premises and the common
areas of the project which are caused by fire or other casualty, or by any other
cause whatsoever including the negligence of Lessor, its agents, servants,
employees, licensees, invitees or guests; provided, however, that Lessor shall
not be responsible for loss or
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damage to any alterations, additions or fixtures installed by Lessee.
Notwithstanding the foregoing, if any such loss sustained by Lessor is caused by
the negligence of Lessee, its agents, servants, employees, licensees, invitees
or guests, then Lessee shall be liable to Lessor for the amount of the
deductible under Lessor's insurance, up to a maximum of $25,000.
In order to properly insure against the risks described above, during the
term of this lease the following insurance coverage shall be carried and paid
for by Lessor as part of the operating expenses for the project;
(a) Fire and extended coverage insurance covering the building and
Demised Premises against loss or damage by fire and against loss or damage by
other risks now or hereafter embraced by "all-risk coverage," in the amounts
equal to the full replacement cost of the building.
(b) Business interruption insurance against loss of rent or rental
value due to any risk insured above, including extended coverage endorsement, in
an amount not less than 180 days of rental payments due for the building and the
Demised Premises.
(2) Lessee's property. All personal property belonging to Lessee or to
-----------------
Lessee's agents, servants, employees, licensees, invitees or guests which is
located in or about the building or the Demised Premises shall be there at the
sole risk of Lessee or such other person. Neither Lessor nor its agents shall
be liable for any damage to either the person or the property of Lessee, or for
the loss of or interruption to business, or for the loss of or damage to any
property of Lessee, by theft or from any other cause whatsoever including, but
not limited to, loss or damage resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, rain or leaks from any part of the Demised
Premises or from the pipes, appliances or plumbing works, or from the roof,
street or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature, unless caused by the negligence of Lessor, its
agents, servants, employees, licensees, invitees or guests. Neither Lessor nor
its agents shall be liable for any loss or damage caused by other tenants, if
any, or persons in the Demised Premises, or caused by operations in the
construction of any private, public or quasi-public work. Notwithstanding the
foregoing, if any such loss sustained by Lessee is caused by the negligence of
Lessor, its agents, servants, employees, licensees, invitees or guests, then
Lessor shall be liable to Lessee for the amount of the deductible under Lessee's
insurance, up to a maximum of $25,000. It is expressly agreed that it shall be
the sole obligation of Lessee to insure, at its expense, any and all property of
any nature whatsoever of Lessee's located on the Demised Premises.
(3) Waiver of subrogation. Except as provided above in respect to the
---------------------
deductible under their respective insurance policies, Lessor and Lessee hereby
waive any and all rights which they may have against the other and hereby
release each other from all liability or responsibility to the other or anyone
claiming through or under them by way of subrogation or otherwise, for any loss
or damage to the Demised Premises, the Buildings, the Common Areas or any
property therein caused by fire or other casualty, even if such fire or other
casualty was caused by the fault or negligence of the other party, their
respective agents, servants, employees, licensees, invitees or guests. All fire
and extended coverage insurance policies carried by the respective parties on
the Demised Premises, the Buildings, the Common Areas or any property therein
shall allow the insured to waive its right of subrogation against the other
party prior to loss.
b. Public Liability Insurance.
--------------------------
(1) Lessee's liability. Lessee hereby agrees to indemnify, protect, save
------------------
and hold harmless Lessor, its respective representatives, agents, servants and
employees from and against any and all loss, cost and expense arising out of or
connected with the use or occupancy of the Demised Premises or the Common Areas
by Lessee and/or by any of Lessee's representatives, agents, servants,
employees, licensees, invitees or guests pursuant to this lease which use or
occupancy results in any injury, sickness or death, or alleged injury, sickness
or death whatsoever to third persons and/or their property. In the event that
any such claim is alleged against Lessor and/or its successors or assigns by
anyone arising out of the use or occupancy of the Demised Premises or the Common
Areas by Lessee or by its representatives, agents, servants, employees,
licensees,
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invitees or guests, it is expressly understood and agreed that Lessee shall take
over the defense of each and every claim promptly and pay all attorneys' fees,
verdicts, judgements, settlement payments and all other costs and expenses
whatsoever incurred in connection with the defense of all such claims, without
exception, it being expressly understood that Lessee shall be and remain fully
responsible for all such claims and will hold the aforementioned indemnities
completely harmless from and against any cost or expense whatsoever in
connection herewith.
(2) Lessee's insurance. During the term of this Lease, and any extension
------------------
thereof, Lessee shall, at its own cost and expense, maintain and provide general
liability insurance coverage for the benefits and protection of Lessee, Lessor
and Lessor's managing agents, as their interests may appear, in an amount no
less than $1,000,000 combined single limit for personal injury, bodily injury
and property damage, or in such greater amounts of insurance coverage as Lessor
may from time to time reasonably require, against liability of Lessee and its
authorized representatives arising out of or in connection with Lessee's use or
occupancy of the Demised Premises or the Common Areas. Lessor and Lessor's
managing agents shall be named as additional insured parties in all such
insurance policies, as their respective interests may appear. Such insurance
shall be with a company or companies reasonably acceptable to Lessor and
admitted to do business in the state in which the building is located. All such
insurance policies shall be maintained by Lessee in full force and effect during
the entire term of this lease and certificates indicating such policies are in
full force and providing for 30 days' written notice to Lessor prior to
cancellation or material change shall be provided to Lessor. Should Lessee fail
to carry such insurance and furnish Lessor with the required insurance
certificates after notification from Lessor to do so, Lessor shall have the
right to obtain such insurance and Lessee shall pay the cost thereof to Lessor
upon demand.
(3) Lessor's Liability. Lessor hereby agrees to indemnify, protect, save
------------------
and hold harmless Lessee, its respective representatives, agents, servants and
employees from and against any and all loss, cost and expense arising out of or
connected with the Buildings, other than Lessee's use or occupancy of the
Demised Premises or the Common Areas by Lessee and/or by any of Lessee's
representatives, agents, servants, employees, licensees, invitees or guests
pursuant to this Lease, which use or occupancy results in any injury, sickness
or death, or alleged injury, sickness or death whatsoever to third persons
and/or their property. In the event that any such claim is alleged against
Lessee and/or it successors or assigns by any one, other than a claim arising
out of the use or occupancy of the Demised Premises or the Common Areas by
Lessee or by it representatives, agents, servants, employees, licensees,
invitees or guests, it is expressly understood and agreed that Lessor shall take
over the defense of each and every claim promptly and pay all attorneys' fees,
verdicts, judgments, settlement payments and all other costs and expenses
whatsoever incurred in connection with the defense of all such claims, without
exception, it being expressly understood that Lessor shall be and remain fully
responsible for all such claims and will hold the aforementioned indemnities
completely harmless from and against any cost or expense whatsoever in
connection herewith.
ARTICLE 11 - CONSENT REQUIRED
11.01 Lessee shall not assign this Lease in whole or in part, nor sublet
all or any part of the Demised Premises nor permit others to use the Demised
Premises, without the prior written consent of Lessor, said consent not to be
unreasonably withheld or delayed. Consent by Lessor to any assignment or
subletting shall not constitute a waiver of Lessor's right to consent to future
subletting. Notwithstanding any assignment or sublease, Lessee and guarantors
of this Lease, if any, shall remain fully liable on this Lease and shall not be
released from performing any of the terms, covenants, and conditions of this
Lease unless released in writing by the Lessor.
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ARTICLE 12 - DEFAULT OF LESSEE
12.01 If Lessee shall default in the payment of the rent reserved
herein, or in the payment of any item of additional rent or other monies due
hereunder or any part of same, then this Lease and the term hereof shall, at the
option and election of the Lessor, wholly cease and terminate upon three (3)
days written notice, unless Lessee cures the payment default within this three
(3) day period.
12.02 If Lessee shall violate or default any of the other covenants,
agreements, stipulations, or conditions herein, and such violation or default
shall continue for a period of thirty (30) days after written notice of such
violation or default shall have been given by Lessor to Lessee, then it shall be
optional for Lessor to declare this Lease forfeited and the said term ended.
12.03 If Lessor shall declare this Lease forfeited and terminated as
provided for in the preceding paragraphs, at Lessor's option, Lessor may
terminate and end this Lease and re-enter upon the property, whereupon the term
thereby granted, and at the Lessor's option, all right, title and interest in or
under it shall end and Lessee shall become a tenant at sufferance, or else said
Lessor may, at Lessor's option, elect to declare the entire rent for the balance
of the term, or any part thereof, due and payable forthwith, and may proceed to
collect the same either by distress or otherwise, and thereupon said term shall
terminate at the option of the Lessor, or else the said Lessor may take
possession of the premises and rent the same for the account of the Lessee, the
exercise of any of which options herein contained shall not be deemed the
exclusive Lessor's remedy. The expression entire rent for the balance of the
term as used herein shall mean all of the rent prescribed to be paid by the
Lessee unto the Lessor for the full term of this Lease, excluding any
unexercised options to renew, and less, however, any payments that have been
made on account of and pursuant to the terms of said Lease.
12.04 Neither this Lease, nor any interest therein, nor any estate
thereby created shall pass to any trustee, receiver or assignee for the benefit
of creditors or otherwise by operation of law. In the event the estate created
hereby shall be taken in execution or by other process of law, or if Lessee
shall be adjudicated insolvent or bankrupt pursuant to provisions of any state
or federal insolvency or bankruptcy act, or if a receiver or trustee of the
property of Lessee shall be appointed by reason of Lessee's insolvency or
inability to pay its debts, or if any assignment shall be made of Lessee's
property for the benefit of creditors, or if any reorganization preceding under
the federal laws be instituted by or filed against Lessee, then and in any of
such events, Lessor may, at its option, terminate this Lease and all rights of
Lessee herein by giving to Lessee notice in writing of the election of Lessor so
to terminate. In the event of an involuntary bankruptcy, there shall be no
default if such appointment of a trustee or receiver is vacated within thirty
(30) days after such appointment.
12.05 Lessee hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Lessee being
evicted or dispossessed for any cause or in the event of Lessor obtaining
possession of the Demised Premises by reason of the violation by Lessee of any
of the covenants or conditions of this Lease or otherwise.
12.06 ATTORNEY'S FEES:
The prevailing party shall be entitled to recover all reasonable attorney's
fees incurred by him in and about the enforcement or defense of this Lease and
the parties' Lessor/Lessee relationship.
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ARTICLE 13 - ACCESS BY LESSOR
13.01 Lessor or Lessor's agent shall have the right to enter the Demised
Premises at all times, upon reasonable notice of not less than twenty-four (24)
hours, excluding emergency situations, to examine the same and to show them to
prospective purchasers or lessees of the building, and to make such repairs,
alterations, improvements, or additions as Lessor may reasonably deem necessary
or desirable, and Lessor shall be allowed to take all material into and upon
said Demised Premises that may be required thereof without the same constituting
an eviction of Lessee or otherwise. During the six (6) months prior to the
expiration of the term of this Lease, or any renewal term, Lessor may exhibit
the premises to prospective lessees or purchasers and place upon the Common
Areas (away from the main entrance to the Demised Premises) the usual notices
"TO LET or "FOR SALE", or similar wording, which notices Lessee shall permit to
remain thereon without molestation. If Lessee shall not be personally present
to open and permit entry into said premises at any time, when for any reason an
entry therein shall be necessary in an emergency, Lessor or Lessor's agents with
reasonable and prudent judgment may enter the same by forcibly entering the same
without rendering Lessor or such agent liable therefore and without in any
manner affecting the obligations and covenants of this Lease. Nothing herein
contained, however, shall be deemed or construed to impose upon Lessor any
obligation, responsibility, or liability whatsoever, for the care, maintenance,
or repair of the building, or any part thereof, except as otherwise herein
specifically provided.
ARTICLE 14 - LESSEE'S PROPERTY
14.01 TAXES ON LESSEE'S LEASEHOLD:
Lessee shall be responsible for and shall pay before delinquency, all
municipal, county, state, and federal taxes assessed during the term of this
Lease against personal property of any kind owned by or placed in, upon, or
about the Demised Premises by the Lessee.
14.02 NOTICE BY LESSEE:
Lessee shall give immediate oral and written notice to Lessor in case of
fire or other casualty, or accidents in the Demised Premises, or in the
building, or of defects therein or in any fixtures or equipment. Lessor agrees
to promptly notify Lessee of any such situations discovered or reported by other
tenants which may effect Lessee or its employees.
ARTICLE 15 - HOLDING OVER
15.01 This Lease and the tenancy hereby created shall cease and
terminate at the end of the original term hereof, or any extension or renewal
thereof, without the necessity of any notice from either Lessor or Lessee to
terminate the same, and Lessee hereby waives notice to vacate the Demised
Premises and agrees that the Lessor shall be entitled to the benefit of all
provisions of law respecting the summary recovery of possession of the Demised
Premises from a Lessee holding over to the same extent as if statutory notice
had been given.
15.02 Any holding over after the expiration of the term hereof with the
consent of the Lessor shall be construed to be a tenancy from month to month at
a rent thirty percent (30%) greater than the base
13
<PAGE>
rent and additional rent herein specified (prorated on a monthly basis), and
shall otherwise be on the terms and conditions hereby specified, so far as
applicable.
ARTICLE 16 - EMINENT DOMAIN
In the event of any eminent domain or condemnation proceeding or private
sale in lieu thereof in respect to the premises during the term thereof, the
following provisions shall apply.
16.01 If the whole of the premises shall be acquired or condemned by
eminent domain for any public or quasi-public use or purpose, then the term of
this Lease shall cease and terminate as of the date possession shall be taken in
such proceeding and all rentals shall be paid up to that date.
16.02 If any part constituting less than the whole of the premises shall
be acquired or condemned as aforesaid, and in the event that such partial taking
or condemnation shall materially affect the Demised Premises so as to render the
Demised Premises unsuitable for the business of the Lessee in the reasonable
opinion of the Lessor, this Lease shall continue in full force and effect but
with a proportionate abatement of the Base Rent and Additional Rent based on the
portion, if any, of the Demised Premises taken. Lessor reserves the right, at
its option, to restore the Building and the Demised Premises to substantially
the same condition as they were prior to such condemnation. In such event,
Lessor shall give written notice to Lessee within thirty (30) days following the
date possession shall be taken by the condemning authority of Lessor's intention
to restore. Upon Lessor's notice of election to restore, Lessor shall commence
restoration and shall restore the Building and the Demised Premises with
reasonable promptness, subject to delays beyond Lessor's control and delays in
the making of condemnation or sale proceeds adjustments by Lessor, and Lessee
shall have no right to terminate this Lease except as herein provided. Upon
completion of such restoration, the rent shall be adjusted based upon the
portion, if any, of the Demised Premises restored.
16.03 In the event of any condemnation or taking as aforesaid, whether
whole or partial, Lessee shall not be entitled to any part of the award paid for
such condemnation and Lessor is to receive the full amount of such award, the
Lessee hereby expressly waiving any right or claim to any part thereof.
16.04 Although all damages in the event of any condemnation shall belong
to the Lessor, whether such damages are awarded as compensation for diminution
in value of the leasehold or to the fee of the Demised Premises, Lessee shall
have the right to claim and recover from the condemning authority, but not from
Lessor, such compensation as may be separately awarded or recoverable by Lessee
in Lessee's own right on account of any and all damage to Lessee's business by
reason of the condemnation and for or on account of any cost or loss to which
Lessee might be put in removing Lessee's merchandise, furniture, fixtures,
leasehold improvements and equipment. Lessee, however, shall have no claim
against Lessor, nor make any claim with the condemning authority for the loss of
its leasehold estate, any unexpired term or loss of any possible renewal or
extension of said Lease or loss of any possible value of said Lease, or any
unexpired term, renewal or extension.
14
<PAGE>
ARTICLE 17 - MISCELLANEOUS
17.01 ENTIRE AGREEMENT:
This Lease and exhibits attached hereto and forming a part hereof set forth
all of the covenants, promises, agreements, conditions or understandings,
whether oral or written between Lessor and Lessee, and no terms or conditions
apply other than those herein set forth. Except as herein otherwise provided,
no subsequent alteration, amendment, change or addition to this Lease shall be
binding upon Lessor or Lessee unless reduced to writing and signed by them.
17.02 NOTICES:
Any notice, demand, request, or other instrument which may be or is
required to be given under this Lease shall be delivered in person or sent by
United States certified mail, postage prepaid, return receipt requested, and
shall be addressed (a) if to Lessee, at the Demised Premises, or at such other
address as the Lessee shall designate by written notice, and (b) if to Lessor,
c/o Garcia, Meyers & Co., 15950 Bay Vista Drive, Suite 250, Clearwater, Florida
34620 or at such other address as Lessor may designate by written notice. The
notice shall be deemed served when personally delivered or when deposited with
the U.S. Postal Service.
17.03 This Lease shall be construed according to the laws of the State
of Florida.
17.04 VENUE:
Lessee and Lessor hereby agree that in the event either party files a suit
to protect their rights under this Lease, that venue shall be in the Circuit
Court for Pinellas County, Florida. Lessee and Lessor waive any venue rights to
institute suit in a jurisdiction other than in the Circuit Court for Pinellas
County, Florida.
17.05 RADON GAS:
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
ARTICLE 18 - DESTRUCTION OF PREMISES
In the event of any damage or destruction to the Premises by fire or other
cause during the term hereof, the following provisions shall apply.
18.01 If the Building is damaged by fire or any other cause to such
extent that the cost of restoration, as reasonably estimated by Lessor, will
equal or exceed forty percent (40%) of the replacement value of the Building
(exclusive of foundations) just prior to the occurrence of the damage, then
Lessor may, no later than the ninetieth (90th) day following the damage, give
Lessee written notice of Lessor's election to terminate this Lease. If Lessor
chooses to repair and restore, then Lessor shall do so pursuant to the terms of
Article 18.03.
15
<PAGE>
18.02 If the cost of restoration as estimated by Lessor will equal or
exceed forty percent (40%) of said replacement value of the Building, and if the
Demised Premises are not suitable as a result of said damage for the purposes
for which they are demised hereunder in the reasonable opinion of Lessee, then
Lessee may, no later than the ninetieth (90th) day following the damage, give
Lessor a written notice of election to terminate this Lease.
18.03 If the cost of restoration as estimated by Lessor shall amount to
less than forty percent (40%) of said replacement value of the Building, or if,
despite the cost, Lessor does not elect to terminate this Lease, Lessor shall
restore the Building and the Demised Premises with reasonable promptness and
within 180 days, subject to delays beyond Lessor's control and delays in the
making of insurance adjustments by Lessor, and Lessee shall have no right to
terminate this Lease except as herein provided. Lessor shall not be responsible
for restoring or repairing leasehold improvement of the Lessee.
18.04 In the event of either of the elections to terminate, this Lease
shall be deemed to terminate on the date of the receipt of the notice of
election and all rentals shall be paid up to that date. Lessee shall have no
claim against Lessor for the value of any unexpired term of this Lease.
18.05 In any case where damage to the Building shall materially affect
the Demised Premises so as to render them unsuitable in whole or in part for the
purposes for which they are demised hereunder, then, unless such destruction was
wholly or partially caused by the negligence or breach of the terms of this
Lease by Lessee, its employees, agents, contractors or licensees, a portion of
the rent based upon the amount of the extent to which the Demised Premises are
rendered unsuitable in Lessor's reasonable opinion shall be abated until
repaired or restored. If the destruction or damage was wholly or partially
caused by negligence or breach of the terms of this Lease by Lessee as aforesaid
and if Lessor shall elect to rebuild, the rent shall not abate and the Lessee
shall remain liable for the same.
ARTICLE 19 - SUBORDINATION
19.01 This Lease shall be subordinated to any mortgages that may exist
or that may hereafter be placed upon the Demised Premises and to any and all
advances made thereunder, and to the interest upon the indebtedness evidence by
such mortgages, and to all renewals, replacements and extensions thereof. Lessor
shall require any holder or holders thereof to execute a non-disturbance
agreement and Lessee agrees to execute a subordination agreement with the holder
thereof which agreement shall provide as follows.
19.02 Such holder shall not disturb the possession and other rights of
Lessee under this Lease so long as lessee is not in default hereunder.
19.03 In the event of acquisition of title to the Demised Premises by
such holder, such holder shall accept the terms as Lessor of the Demised
Premises under the terms and conditions of this Lease and shall perform all
obligations of Lessor hereunder.
19.04 The Lessee shall recognize such holder as Lessor hereunder. The
Lessee shall, upon receipt of a request from Lessor therefore, execute and
deliver to Lessor or to any proposed purchaser of the Premises, a certificate in
recordable form, certifying that this Lease is in full force and effect, and
that there are no offsets against rent nor defenses to Lessee's performance
under this Lease, or setting forth any such offsets or defenses claimed by
Lessee, as the case may be.
16
<PAGE>
ARTICLE 20 - ATTORNMENT
20.01 In the event of a sale or assignment of Lessor's interest in the
Premises, or the Building in which the Demised Premises are located or in this
Lease, or if the Premises come into custody or possession of a mortgagee or any
other party, whether because of a mortgage foreclosure or otherwise, Lessee
shall attorn to such assignee or other party and recognize such party as Lessor
hereunder; provided, however, Lessee's peaceable possession will not be
disturbed so long as Lessee faithfully performs its obligations under this Lease
and shall not be in default hereunder. Lessee shall execute on demand any
attornment agreement required by any such party to be executed, containing such
provisions and such other provisions as such party may require.
ARTICLE 21 - NOVATION IN THE EVENT OF SALE
21.01 In the event of the sale of the Demised Premises, Lessor shall be
and hereby is relieved of all of the covenants and obligations created hereby
accruing from and after the date of sale, and such sale shall result
automatically in the purchaser assuming and agreeing to carry out all the
covenants and obligations of Lessor herein. Notwithstanding the foregoing
provisions of this Section, Lessor, in the event of a sale of the Demised
Premises, shall cause to be included in this agreement of sale and purchase a
covenant whereby the purchaser of the Demised Premises assumes and agrees to
carry out all of the covenants and obligations of Lessor herein.
21.02 The Lessee agrees to any time and from time to time upon not less
than five (5) days prior written request by the Lessor to execute, acknowledge
and deliver to the Lessor a statement in writing certifying that this Lease is
unmodified and in full force and effect and if modified, stating the
modifications and the dates to which the basic rent and other charges have been
paid in advance, if any, it being intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser of
the fee or mortgagee or assignee of any mortgage upon the fee of the Demised
Premises.
ARTICLE 22 - SUCCESSOR AND ASSIGNS
The terms, covenants, and conditions hereof shall be binding upon and inure
to the successors and assigns of the parties hereto.
ARTICLE 23 - PARKING
Lessor shall provide on a non-exclusive basis not less than four (4)
parking spaces per 1,000 rentable square feet in the Demised Premised at no cost
to Lessee during the initial term of this Lease.
17
<PAGE>
IN WITNESS WHEREOF, this Lease has been duly and properly executed the day
and year first above written:
Dated: 3/12/97 Pinellas Bay Vista Partners, Ltd.
----------------------- ---------------------------------
LESSOR
By: Pinellas Bay Vista General Partners,
Ltd. its General Partner
By: Pinellas Bay Vista, Inc.
its General Partner
By: [SIGNATURE APPEARS HERE]
-----------------------------
Its: VICE PRESIDENT
-----------------------------
Dated: 3/12/97 TECHFORCE CORPORATION
----------------------- ---------------------
LESSEE
------
By: [SIGNATURE APPEARS HERE]
-----------------------------
Its: CFO
-----------------------------
By:
-----------------------------
Its:
-----------------------------
18
<PAGE>
ADDENDUM TO LEASE
AGREEMENT, made as of the 30th day of September, 1997, by and between
PINELLAS BAY VISTA PARTNERS, LTD. ("Lessor") and TECHFORCE CORPORATION
("Lessee").
WITNESSETH:
WHEREAS, the Lessee and Lessor entered into a Lease dated March 12, 1997,
(the "Lease") for space addressed as (street number to be assigned) Rio Vista
Drive, Clearwater, Florida 34620, at a rental rate and upon other terms and
conditions more fully set forth in said Lease, and
WHEREAS, the parties desire to modify the aforesaid Lease in the respects
herein acknowledged to the mutual agreements herein contained, the parties
hereto agree as follows:
1. Effective September 22, 1997 Lessee and Lessor hereby agree that the
addresses for said property shall be 5741 Rio Vista Drive, Clearwater,
Florida 33760.
2. Effective September 22, 1997, Lessee agrees to lease the remainder of
the space in Building A, at Bay Vista Gardens II, bringing the total square
footage leased to approximately 40,800 r.s.f. (exact square footage to be
confirmed when the construction documents for the space are completed).
The additional space shall be leased under all of the same terms and
conditions set forth in the original Lease.
3. Except as hereto amended, all of the terms and conditions of the
original Lease shall remain as stated therein.
IN WITNESS WHEREOF, PINELLAS BAY VISTA PARTNERS, LTD. (the "Lessor") and
TECHFORCE CORPORATION (the "Lessee") have caused these present to be signed in
their corporate names by the proper officers thereunto duly authorized, the day
and year first above written.
WITNESSES: LESSEE:
TECHFORCE CORPORATION
[SIGNATURE APPEARS HERE] BY: /s/ Jerrel W. Kee
- ------------------------- ------------------------------
[SIGNATURE APPEARS HERE] JERREL W. KEE
- ------------------------- ---------------------------------
(print name)
TITLE: CFO
---------------------------
WITNESSES: LESSOR:
PINELLAS BAY VISTA PARTNERS, LTD.
[SIGNATURE APPEARS HERE] BY: /s/ Manuel Garcia
- ------------------------- ------------------------------
[SIGNATURE APPEARS HERE] MANUEL GARCIA
- ------------------------- ---------------------------------
(print name)
TITLE: GENERAL PARTNER
---------------------------
<PAGE>
EXHIBIT 11.1
TECHFORCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996 AND THE
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding ............... 8,042,115 7,905,500 8,016,704 7,905,500
Net effect of dilutive securities, based on the
treasury stock and if-converted methods ......... 430,505 433,363 358,469 433,363
-------------- --------------- --------------- -------------
Total Shares used in computation ................... 8,472,620 8,338,863 8,375,173 8,338,863
Net Income ......................................... $ 332,000 $ 864,000 $ 2,225,000 $ 1,263,000
Net income per common and common equivalent share ... $ 0.04 $ 0.10 $ 0.27 $ 0.15
</TABLE>
Note: Fully diluted earnings per share are the same as primary earnings per
share.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TECHFORCE
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997
(IN THOUSAND AND TECHFORCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT PER
SHARE DATA) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,619
<SECURITIES> 4,134
<RECEIVABLES> 12,322
<ALLOWANCES> 313
<INVENTORY> 3,480
<CURRENT-ASSETS> 26,144
<PP&E> 24,363
<DEPRECIATION> 9,603
<TOTAL-ASSETS> 52,031
<CURRENT-LIABILITIES> 13,875
<BONDS> 6,194
0
0
<COMMON> 81
<OTHER-SE> 30,754
<TOTAL-LIABILITY-AND-EQUITY> 52,031
<SALES> 19,216
<TOTAL-REVENUES> 47,224
<CGS> 12,745
<TOTAL-COSTS> 32,059
<OTHER-EXPENSES> 11,630
<LOSS-PROVISION> (21)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,486
<INCOME-TAX> 1,261
<INCOME-CONTINUING> 2,225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,225
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
