SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1998
COMMISSION FILE NUMBER: 0-24484
MODIS PROFESSIONAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3116655
- - -------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Independent Drive, Jacksonville, FL 32202
- - ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number including area code): (904) 360-2000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Par Value $0.01 Per Share New York Stock Exchange
(Title of each class) (Name of each exchange on
which registered)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant (assuming for these purposes, but not conceding, that all
executive officers and directors are "affiliates" of the Registrant), based upon
the closing sale price of common stock on March 19, 1999 as reported by the New
York Stock Exchange, was approximately $915,729,141.
As of March 19, 1999, the number of shares outstanding of the Registrant's
common stock was 95,787,567.
DOCUMENTS INCORPORATED BY REFERENCE. Portions of the Registrant's Proxy
Statement for its 1999 Annual Meeting of shareholders are incorporated by
reference in Part III.
<PAGE>
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that are
subject to certain risks, uncertainties or assumptions and may be affected by
certain other factors, including but not limited to the specific factors
discussed in Part II, Item 5 under 'Market for Registrant's Common Equity and
Related Shareholder Matters' and in Part II, Item 7 under'Fiscal 1998 compared
to Fiscal 1997 - Results from continuing operations - revenue'; 'Factors Which
May Impact Future Results and Financial Condition' and under 'Other Matters -
Year 2000 Compliance.' In addition, except for historical facts, all information
provided in Part II item 7a. under 'Quantitative and qualitative disclosures
about market risk' should be considered forward looking statements. Should one
or more of these risks, uncertainties or other factors materialize, or should
underlying assumptions prove incorrect, actual results, performance or
achievements of the Company may vary materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Forward-looking statements are based on beliefs and assumptions of the Company's
manangement and on information currently available to such management.
Forward-looking statements speak only as of the date they are made, and the
Company undertakes no obligation to update publically any of them in light of
new information or future events. Undue reliance should not be placed on such
forward-looking statements, which are based on current expectations.
Forward-looking statements are not guarantees of performance.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Modis Professional Services, Inc. ('Modis' or the 'Company') is a global
provider of professional business services, including consulting, outsourcing,
training and strategic human resource solutions, to Fortune 1000 and other
leading businesses. The Company's services are provided through its two business
divisions: (i) Information Technology, which provides technology consulting,
outsourcing and solutions services, and (ii) Professional Services, which
provides personnel who perform specialized services such as accounting, legal,
technical / engineering, scientific and career management and consulting.
Headquartered in Jacksonville, Florida, the Company has approximately 264
offices throughout the United States, Canada, United Kingdom, and certain parts
of continental Europe. Modis' objective is to concentrate its efforts and
resources on profitable, high-growth, high-end information technology ('IT') and
professional services that have the ability to consistently generate strong
earnings. The Company has experienced substantial growth in revenue and earnings
driven primarily by (i) acquisitions of other information technology and
professional services companies; (ii) increased business with the Company's
existing clients; (iii) increased penetration of existing and new markets; and
(iv) trends toward the increased outsourcing of non-core competency professional
business services.
The following table sets forth the respective business divisions' share of the
Company's consolidated revenue and gross profit for the fiscal years ending 1998
and 1997:
<TABLE>
<CAPTION>
Division % of Consolidated Revenues % of Consolidated Gross Profit
- - --------------------------------------- --------------------------- -------------------------------
<S> <C> <C>
1998:
Information Technology 68.4% 64.5%
Professional Services 31.6% 35.5%
1997:
Information Technology 67.1% 63.7%
Professional Services 32.9% 36.3%
</TABLE>
Business Strategy
Modis seeks to expand its revenues and profitability by expanding its
Information Technology and Professional Services divisions through offering an
extensive range of specialized human resource and consulting services through a
global network of branch offices. The Company markets and delivers its services
with an emphasis on local entrepreneurial spirit and decision-making at the
branch level combined with strong corporate, technological and managerial
support. The Company seeks to provide innovative and customized solutions to
human resource needs and to expand the Company's relationships with its Fortune
1000 clients. Modis' mission is to set the standard for the professional
business services industry by empowering its employees to provide quality
services.
Management believes the Company's concentration on the Information Technology
and Professional Services divisions allows faster growth and higher profit
margins versus the more traditional commercial staffing businesses due to the
specialized expertise of the professional personnel. Management's strategy is to
strengthen its position as one of the few companies offering information
technology and professional services on a global scale. Modis' principal
competitors in the information technology and professional services areas
generally consist of specialty firms in each of those fields, and to a lesser
extent, diversified business services firms. The Company's strategy is to
continue to increase the overall revenue and gross profits from the Information
Technology and Professional Services divisions by expanding current specialties
into new geographic markets, identifying and adding new practice areas, and
leveraging wherever possible on existing specialty strengths. The Company has
significantly expanded its information technology operations since 1997 by
acquiring approximately twenty firms with information technology operations.
These acquisitions allow the Information Technology division to provide clients
with services in the 48 contiguous states, Canada, the United Kingdom, the
Middle East and certain parts of continental Europe. See Note 14 to the
Company's audited consolidated financial statements for further discussion of
the Company's foreign operations.
GROWTH STRATEGY
The Company pursues a focused growth strategy designed to achieve both increased
revenues and earnings. The key elements of this growth strategy are as follows:
Internal Growth
The Company's internal growth strategy includes: (i) positioning in market
locations, customer segments and skill areas that value high levels of service;
(ii) increasing penetration of existing markets; (iii) expanding into new and
contiguous markets; and (iv) migrating to higher margin specialty practice
areas.
Acquisitions
The Company's growth strategy includes the acquisition of existing businesses
with complementary service offerings, strong management, profitable operating
results and recognized local and regional presence. The Company has acquired
approximately thirty information technology and professional services companies
since 1997. Acquisition criteria considered by management includes, among other
things, financial performance, a desirable market location, significant market
share, new or expanded specialties that can be added to the Company's existing
lines of business, efficient operating systems and existing management that will
operate effectively within the Company's existing managerial structure. The
Company believes that there is an opportunity, as a part of the consolidation in
the global business services industry, to focus on acquisitions of companies
that offer specialized information technology and other professional services.
The Company's management has had success in identifying acquisition candidates
that complement existing businesses, integrating them into existing operations
and utilizing them to enhance the Company's growth performance.
INFORMATION TECHNOLOGY DIVISION
Market Overview
The need for information technology services continues to expand as companies
and governmental agencies continue to require increased performance from their
information management systems. The reliance on information systems to provide
companies with a competitive advantage in the operation of their businesses has
prompted an exponential demand for information technology services. The demand
is driven by rapid technology shifts, a move to internet and web enabled
applications, increased cost pressures, skill shortages, and certain benefits
from outsourcing the information services which allows a company to focus on its
core competencies. These market influences are expected to remain long term in
nature and to increase the reliance upon information technology services
companies to recruit, train, and provide personnel and technology solutions and
outsourcing services as companies increase their demand for information
technology needs.
The supply of qualified information technology professionals continues to lag
behind the global demand for information technology services and it is
increasingly difficult for corporate MIS departments to keep internal staff
current with the latest technologies and skills. This results in an increased
dependence on outside consulting, outsourcing and contract technology services.
This shortfall of professionals has resulted in skill shortages and higher
costs, primarily in the newest technologies and high-end solutions sector of the
market. This has contributed to an increased trend by companies to obtain
outside consulting services, outsourcing and human resource solutions on a cost
efficient basis.
Division Operations
The Information Technology division, which operates primarily under the modis
brand name, accounted for 68.4% of the Company's fiscal 1998 revenues. Other
specialty brand names in this division include: IT Link, Hunterskil Howard,
Software Knowledge, Cope, Computer Action, Actium, Executive's Monitor, Inc. and
Berger & Co. A full range of information technology services are provided
through the Information Technology division's two business units, modis
Solutions and modis Consulting (collectively 'modis'), targeting a wide range of
industries, including banking and finance, manufacturing, public utilities,
retail, state and local government, technology, telecommunication and
transportation. As of December 31, 1998, the Information Technology division
operated 112 offices.
modis Solutions' wide range of services includes IT planning and strategies,
Enterprise Resource Planning ('ERP') software implementation, object oriented
methodology, web-enabled services, life cycle development, data warehousing,
process reengineering, mainframe to client-server transition, client-server
application development, custom software application development, Year 2000
remediation and consulting, management consulting, systems integration, and
other high-end IT practices.
modis Consulting provides staff augmentation for application development
services and brings in needed technical and project management processes to help
businesses achieve more predictable project execution and develop higher quality
systems more efficiently and effectively. Application development teams include
software application developers, system analysts, database analysts, software
specialists, documentation specialists, project managers, systems
administrators, and software engineers. Outsourcing of programming and
maintainence of software applications and certain MIS functions are provided
through both the Solutions and Consulting units.
Division Strategy
The Information Technology division pursues the following strategies in an
attempt to grow market share and further improve operating results:
Leverage Recruiting Power: With a base of over 100 offices worldwide, modis
employs over 1,000 professional technical recruiters. The resumes of nearly 1
million IT professionals are housed in the division's corporate databases. This
recruiting power gives modis the ability to compete effectively for relatively
scarce IT talent. To support the recruiting effort, modis offers benefit
programs which include medical, dental and 401(k) plans. The division also
recruits internationally and provides sponsorships for H-1B visas for qualified
candidates.
Emphasis on Specialty Solutions: The Information Technology division focuses on
specialized solutions such as ERP implementation, application development,
process reengineering and data warehousing which generally offer greater gross
margins than other IT services.
Cross-Selling Between Offices: The Information Technology division intends to
generate greater volumes of high-end specialty solution services by utilizing
its 100+ branches as a distribution channel for cross-selling. This positively
affects the revenue growth and operating margins of branches through the
marketing of high hourly bill rates, and high value services.
Upgrade Consultant Skills: The Information Technology division attempts to
continually upgrade the skills and market value of its consultants by providing
advanced specialty training through its IBT (internet based training) program in
such areas as ERP software implementation, object oriented technologies and
internet/intranet application development. This aids in consultant retention as
well as increasing hourly bill rates.
The Company completed the following acquisitions in the Information Technology
division for the year ended 1998:
<TABLE>
<CAPTION>
(UNAUDITED)
FISCAL 1997
ACQUISITION REVENUES
DATE (IN MILLIONS)
----------------------------------
<S> <C> <C>
Technology Services Corporation 1/98 $ 9.2
Actium, Inc. and affiliates 3/98 $ 63.7
Avalon, Ltd. 5/98 $ 2.3
Consulting Partners, Inc. 8/98 $ 9.5
Cope Consulting, Ltd. and affiliates 9/98 $ 16.1
Software Knowledge, Ltd., and affiliates 11/98 $ 31.8
</TABLE>
<PAGE>
PROFESSIONAL SERVICES DIVISION
Market Overview
The need for professional services, specifically legal, accounting, career
management and consulting, scientific, and engineering / technical solutions,
has increased rapidly in response to the continuing shift in the respective
industries in which these professionals operate. The focus of large corporations
has migrated to a more flexible professional workforce which employs personnel
on a skill-specific or project-specific basis. This shift has increased the
reliance upon business service partners to be able to recruit and provide
solutions to these companies on a skill-specific or project-specific basis, or
an economic basis. The trend toward outsourcing these services is expected to be
long term in nature.
Division Operations
The Professional Services division, which accounted for 31.6% of the Company's
fiscal 1998 revenues, provides consulting, outsourcing and human resource
solutions for accounting, legal, engineering / technical, scientific and
career management and consulting functions.
Accounting Unit
The Accounting unit, which operates primarily under the Accounting Principals
brand name in the United States and under the Badenoch and Clark brand name
throughout the United Kingdom, provides professionals and project solutions and
support in finance/banking, data processing and accounting, including auditors,
controllers/CFOs, CPAs, financial analysts, mortgage processors, loan
processors, A/R and A/P clerks, and tax accountants. By providing these
accounting and financial services, the Company offers customers a reliable and
economic resource for financial professionals to address uncertain or uneven
work loads caused by special projects or unforeseen emergencies. The Company
entered the accounting services industry in 1995 through the acquisition of a
small, regional accounting firm and has since increased the division to
encompass 43 branches in the U.S. and the United Kingdom, as of December 31,
1998.
Legal Unit
The Legal unit, which operates primarily under the Special Counsel brand name,
provides litigation support and consulting as well as human resource services
and solutions to corporate legal departments and law firms. These services
include the provision of project teams/individuals consisting of: attorneys,
paralegals, legal secretaries, and law librarians to corporate legal departments
and private law firms for litigation support, as well as project and document
management, document imaging and coding, and trial presentation services. The
Company primarily competes with a few large companies and many local firms as
this market is highly fragmented. The Company entered the legal industry in 1995
through the acquisitions of Attorneys Per Diem, a Baltimore operation, (now
Special Counsel) in 1995, and Special Counsel, Inc., a New York City operation.
As of December 31, 1998, the legal unit has 30 branches operating primarily in
the United States, with capability in the United Kingdom through its Badenoch
and Clark brand.
Technical and Engineering Unit
The Technical and Engineering unit, collectively called ENTEGEE, provides
drafters, designers and engineers in the mechanical and electrical engineering
fields as well as personnel to the chemical, plastics and other industries.
ENTEGEE also provides high level engineering and drafting services, including
the outsourcing of specialized design services such as architectural design and
drafting, tool designs and computer-aided design ('CAD') services. ENTEGEE's
clients range from transportation, and aerospace to engineering firms, print
circuit board manufacturers, and other domestic and international businesses. As
of December 31, 1998, the technical and engineering unit operates 22 branches
throughout the United States.
Scientific Unit
The Scientific unit, Scientific Staffing, provides trained and advanced-degreed
scientists, laboratory technicians and support peronnel to companies in the
pharmaceutical, chemical, biotechnical, environmental, health care and consumer
products industries. As of December 31, 1998, the Scientific unit operates 24
branch offices throughout the United States.
Career Management and Consulting Unit
The Career Management and Consulting unit, Manchester, Inc. and Diversified
Search, Inc. offers corporate outplacement services, including career
counseling, resume development, skills assessment, interview and negotiating
techniques, and employee guidance counseling. It also provides leadership
development, career management consulting, retained executive search and other
human resource services to the banking, financial services, healthcare,
pharmaceutical, chemical and manufacturing industries. This unit started with
the acquisition of Manchester Partners International, Inc. ('Manchester') in
January 1997 and as of December 31, 1998 it operates through a network of 33
branch offices throughout the United States.
Division Strategy
The Professional Services Division pursues many strategies to grow market share
and further improve operating results. Several of the more distinguishing
strategies are as follows:
Staff Augmentation. The business units of the Professional Services Division
each provide variable workforce solutions by providing intellectual capital to
meet the changing needs of the clients. By establishing new relationships,
forming strategic alliances and continually improving current client and
consultant relationships management believes the traditional staff augmentation
will continually be an integral component to its service mix.
Specialized Staffing and Specialty Solution Opportunities. Many of the
Professional Service Divisions offices provide specialty solutions and staffing
to its corporate clients beyond the traditional professional staff augmentation.
Management believes it can leverage these practice specialties and client
relationships within each business unit by offering specialized services and
solutions to other existing and prospective clients. Examples include document
and trial management services, leadership development, executive coaching and
specialized computer aided design services.
Professional Development Opportunities. Enhancing the knowledge and skills of
the consultants and employees of the Professional Services Division based on the
needs of our clients will strengthen our overall relationship with clients,
consultants, and employees. Generally, these strategies are intended to better
serve our clients and strengthen our professionalism throughout each business
unit which management believes will improve overall relationships and
profitability by client and improve retention of consultants and employees.
The Company completed the following acquisitions in the Professional Services
division for the year ended 1998:
<TABLE>
<CAPTION>
(UNAUDITED)
FISCAL 1997
ACQUISITION REVENUES
DATE (IN MILLIONS)
----------------------------------
<S> <C> <C>
Millard Consulting, Inc. 5/98 $ 4.2
Diversified Search, Inc. 6/98 $ 5.6
Colvin Resources Group - Fort Worth, Inc. 7/98 $ 1.9
Accountants Express of San Diego, Inc. 8/98 $ 1.5
</TABLE>
BRANCH OFFICES
The Company delivers its services through a branch office network of 264 offices
primarily throughout the United States, and to a lesser extent, Canada, United
Kingdom, and certain parts of continental Europe. The following table shows the
Company's branch offices as of the dates indicated (including offices of an
acquired company only after such acquisition):
- - ------------------------ ------------- ------------- ------------- -------------
Branch Offices: 1995 1996 1997 1998
- - ------------------------ ------------- ------------- ------------- -------------
Information Technology 8 72 110 112
Professional Services 21 73 144 152
--- --- --- ---
Total 29 145 254 264
- - ------------------------ ------------- ------------- ------------- -------------
COMPETITION
The business services industry has grown rapidly in recent years as companies
have utilized business service firms to provide value added solutions ranging
from the outsourcing of non-core competencies to the recruitment of a flexible
workforce able to provide a company with the unique skills it does not house
internally. Modis believes that the increasing pressure that companies are
experiencing to remain competitive and efficient will cause companies to focus
their permanent internal staff around their core competencies while expanding
their use of business service partners to provide strategic solutions to fulfill
their other business needs. Modis also believes that the business services
industry is highly fragmented, but is experiencing increasing consolidation
largely in response to increased demand for companies to provide a wide range of
comprehensive human resource solutions to regional and national accounts. A
large percentage of business services firms are local operations with fewer than
five offices. Within local markets, these firms actively compete with the
Company for business, and in most of these markets no single company has a
dominant share of the market. The Company also competes with larger full-service
and specialized competitors in national, regional and local markets.
The principal national competitors of the Company's Information Technology
division include Keane Inc., Computer Horizons Corporation, Metamor Worldwide,
Inc., CIBER, Inc., Cambridge Technology Partners, Inc., Technology Services
Corporation, Whittman-Hart, Inc., CAP Gemini, Inc., Sapient Corporation, Data
Processing Resources Corporation and, to an extent, the consulting divisions of
IBM and the 'Big Five' accounting firms. The principal national competitors of
the Company's Professional Services division include Alternative Resources
Corporation, On Assignment, Inc., the legal division of Kelly Services, Inc.,
The Olsten Corporation, CDI Corporation, Romac International, Inc., Acsys, Inc.
and Robert Half International, Inc. The Company believes that the primary
competitive factors in obtaining and retaining clients are an understanding of
clients' specific job requirements, the ability to provide professional
personnel in a timely manner, the monitoring of quality of job performance, and
the price of services. The primary competitive factors in obtaining qualified
candidates for professional employment assignments are wages, responsiveness to
work schedules, continuing professional education opportunities, and number of
hours of work available. Management believes that Modis is highly competitive in
all of these areas.
FULL-TIME EMPLOYEES
At March 19, 1999, the Company employed approximately 16,500 professional and IT
consultants, and approximately 3,000 corporate employees on a full-time
equivalent basis. Approximately 200 of the employees work at corporate
headquarters. Full-time employees are covered by life and disability insurance
and receive health and other benefits.
GOVERNMENT REGULATIONS
Outside of the United States and Canada the personnel outsourcing segment of the
Company's business is closely regulated. These regulations differ among
countries but generally may regulate: (i) the relationship between the Company
and its temporary employees; (ii) licensing and reporting requirements; and
(iii) types of operations permitted. Regulation within the United States does
not materially impact the Company's operations.
SERVICE MARKS
The Company or its subsidiaries maintain a number of service marks and other
intangible rights, including federally registered service marks for MODIS (and
logo), ACCOUNTING PRINCIPALS (and logo), MANCHESTER, SCIENTIFIC STAFFING and
SPECIAL COUNSEL for its services generally. The Company or its subsidiaries have
applications pending before the Patent and Trademark Office for federal
registration of the service marks for MODIS PROFESSIONAL SERVICES (and logo),
MODIS SOLUTIONS (and logo), ENTEGEE, MANAGEMENT PRINCIPALS and THE EXPERTS (and
logo). The Company plans to file affidavits of use and timely renewals, as
appropriate, for these and other intangible rights it maintains. The Company
also has applications with the appropriate authorities for the MODIS service
mark in Canada, the United Kingdom and the European Union.
SALE OF COMMERCIAL AND HEALTH CARE DIVISIONS
On June 8, 1998, the Company's subsidiary, Strategix Solutions, Inc.
('Strategix') filed a registration statement with the Securities and Exchange
Commission for its initial public offering and subsequent spin off (subject to
certain conditions) of the Company's Commercial operations and its Teleservices
division. Before the initial public offering was consummated, the Company sold
its Commercial operations and its Teleservices division to Randstad U.S., L.P.,
a subsidiary of Randstad Holding nv, for approximately $850 million, prior to
any purchase price adjustment, in cash. The sale was completed on September 27,
1998.
Effective March 30, 1998, the Company sold the operations and certain assets of
its Health Care division for consideration of $8.0 million, consisting of $3.0
million in cash and $5.0 million in a note receivable due March 30, 2000 bearing
interest at 2% in excess of the prime rate. In addition, the Company retained
the accounts receivable of the Health Care division of approximately $28.2
million.
SEASONALITY
The Company's quarterly operating results are affected primarily by the number
of billing days in the quarter and the seasonality of its customers' businesses.
Demand for the Company's services has historically been lower during the
year-end holidays through February of the following year, showing gradual
improvement over the remainder of the year.
ITEM 2. PROPERTIES
The Company owns no material real property. It leases its corporate headquarters
as well as all but one of its branch offices. The branch office leases generally
run for three to five-year terms. The Company believes that its facilities are
generally adequate for its needs and does not anticipate difficulty replacing
such facilities or locating additional facilities, if needed.
ITEM 3. LEGAL PROCEEDINGS
The Company, in the ordinary course of its business, is from time to time
threatened with or named as a defendant in various lawsuits. The Company
maintains insurance in such amounts and with such coverage and deductables as
management believes are reasonable and prudent.
There is no pending litigation that the Company believes is likely to have a
material adverse effect on the Company, its financial position or results of its
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the twelve months ended December 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The following table sets forth the reported high and low sales prices of the
Company's Common Stock for the quarters indicated as reported on the New York
Stock Exchange under the symbol "ASI" through September 30, 1998. Effective
October 1, 1998, subsequent to the Company's sale of its commercial division,
the Company changed its trading symbol and began trading on the New York Stock
Exchange under "MPS".
<TABLE>
<CAPTION>
<S> <C> <C>
FISCAL YEAR 1997 High Low
First Quarter........................................................ $25.25 $16.13
Second Quarter....................................................... 26.63 15.75
Third Quarter........................................................ 31.50 23.31
Fourth Quarter....................................................... 31.88 21.75
FISCAL YEAR 1998
First Quarter........................................................ $35.00 $22.00
Second Quarter....................................................... 38.86 29.38
Third Quarter........................................................ 33.25 10.50
Fourth Quarter....................................................... 18.63 9.94
</TABLE>
In addition to the factors set forth below in 'FACTORS WHICH MAY IMPACT FUTURE
RESULTS OF THE COMPANY' under 'MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS', the price of the Company's Common Stock is
affected by fluctuations and volatility in the financial and equity markets
generally and in the Company's industry sector in particular.
As of March 19, 1999, there were approximately 959 holders of record of the
Company's Common Stock.
No cash dividend or other cash distribution with respect to the Company's Common
Stock has ever been paid by the Company. The Company currently intends to retain
any earnings to provide for the operation and expansion of its business and does
not anticipate paying any cash dividends in the foreseeable future. The
Company's revolving credit facility prohibits the payment of cash dividends
without the lender's consent.
In March 1998, the Company issued 4,598,698 shares of Common Stock to the former
shareholders of Actium, Inc. in exchange for 100% of the outstanding shares of
Actium, Inc. In addition, in August 1998, the Company issued 874,815 shares of
Common Stock to the former shareholders of Consulting Partners, Inc. in exchange
for 100% of the outstanding shares of Consulting Partners, Inc. These issuances
of securities were made in reliance on the exemption from registration provided
under Section 4(2) of the Securities Act of 1933 as a transaction by an issuer
not involving a public offering. All of the securities were acquired by the
recipients for investment and with no view toward the public resale or
distribution of the securities without registration. There was not any public
solicitation and the issued stock certificates bore restrictive legends. All of
such shares were subsequently registered for sale by effective Registration
Statements on Form S-3 in accordance with the terms governing the acquisition of
Actium, Inc. and Consulting Partners, Inc.
On October 31, 1998, the Company's Board of Directors authorized the repurchase
of up to $200.0 million of the Company's Common Stock pursuant to a share
buyback program. On December 4, 1998, the Company's Board of Directors increased
the authorized share buyback program by an additional $110.0 million, bringing
the total authorized repurchase amount to $310.0 million. As of December 31,
1998, the Company had repurchased approximately 21,751,000 shares under the
share buyback program. Subsequent to December 31, 1998, the Company completed
the program during February 1999, with the repurchase of approximately 597,000
shares, bringing the total shares repurchased under the program to approximately
22,348,000 shares. All of these shares were retired upon purchase. See '
LIQUIDITY AND CAPITAL RESOURCES' for additional information.
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Fiscal Years Ended
------------------------------------------------------------------------------------
DEC. 31, DEC. 31, Dec. 31, Dec. 31, Jan. 1,
(in thousands, except per share amounts) 1998 1997 (1) 1996 (1) 1995 (1) 1995 (1)
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue $ 1,702,113 $ 1,164,124 $ 580,016 $ 90,489 $ 36,312
Cost of Revenue 1,234,537 835,609 426,814 62,382 25,448
------------------------------------------------------------------------------------
Gross Profit 467,576 328,515 153,202 28,107 10,864
Operating expenses 301,656 211,727 107,512 15,121 7,298
Restructuring and impairment charges 34,759 - - - -
Merger related costs - - 14,446 - -
------------------------------------------------------------------------------------
Operating income from continuing
operations 131,161 116,788 31,244 12,986 3,566
Other income, (expense), net (13,975) (14,615) (2,974) (1,465) (42)
------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 117,186 102,173 28,270 11,521 3,524
Provision for income taxes 48,326 38,803 19,693 1,333 874
------------------------------------------------------------------------------------
Income from continuing operations 68,860 63,370 8,577 10,188 2,650
Discontinued operations:
Income from discontinued operations,
net of income taxes 30,020 38,663 22,633 18,384 12,472
Gain on sale of discontinued operations,
net of income taxes 230,561 - - - -
------------------------------------------------------------------------------------
Income before extraordinary loss 329,441 102,033 31,210 28,572 15,122
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit (5,610) - - - (1,403)
------------------------------------------------------------------------------------
Net income $ 323,831 $ 102,033 $ 31,210 $ 28,572 $ 13,719
====================================================================================
Pro forma provision for income taxes - - (3,642) 3,144 1,592
------------------------------------------------------------------------------------
Pro forma net income (2) $ 323,831 $ 102,033 $ 34,852 $ 25,428 $ 12,127
====================================================================================
Basic income (loss) per common share:
From continuing operations $ 0.63 $ 0.62 $ 0.09 $ 0.16 $ 0.05
====================================================================================
From discontinued operations $ 0.28 $ 0.38 $ 0.25 $ 0.30 $ 0.26
====================================================================================
From gain on sale (4) $ 2.12 $ 0.00 $ 0.00 $ 0.00 $ 0.00
====================================================================================
From extraordinary item $ (0.05) $ 0.00 $ 0.00 $ 0.00 $ (0.03)
====================================================================================
Basic net income per common share $ 2.98 $ 1.00 $ 0.34 $ 0.46 $ 0.28
====================================================================================
Diluted income (loss) per common share:
From continuing operations $ 0.61 $ 0.59 $ 0.09 $ 0.16 $ 0.05
====================================================================================
From discontinued operations $ 0.26 $ 0.34 $ 0.24 $ 0.27 $ 0.24
====================================================================================
From gain on sale (4) $ 1.97 $ 0.00 $ 0.00 $ 0.00 $ 0.00
====================================================================================
From extraordinary item $ (0.05) $ 0.00 $ 0.00 $ 0.00 $ (0.03)
====================================================================================
Diluted net income per common share $ 2.79 $ 0.93 $ 0.33 $ 0.43 $ 0.26
====================================================================================
Pro forma basic income (loss) per
common share:
From continuing operations $ 0.63 $ 0.62 $ 0.13 $ 0.11 $ 0.02
====================================================================================
From discontinued operations $ 0.28 $ 0.38 $ 0.25 $ 0.30 $ 0.26
====================================================================================
From gain on sale (4) $ 2.12 $ 0.00 $ 0.00 $ 0.00 $ 0.00
====================================================================================
From extraordinary item $ (0.05) $ 0.00 $ 0.00 $ 0.00 $ (0.03)
====================================================================================
Pro forma basic net income per
common share $ 2.98 $ 1.00 $ 0.38 $ 0.41 $ 0.25
====================================================================================
Pro forma diluted income (loss) per
common share:
From continuing operations $ 0.61 $ 0.59 $ 0.13 $ 0.11 $ 0.02
====================================================================================
From discontinued operations $ 0.26 $ 0.34 $ 0.24 $ 0.27 $ 0.24
====================================================================================
From gain on sale (4) $ 1.97 $ 0.00 $ 0.00 $ 0.00 $ 0.00
====================================================================================
From extraordinary item $ (0.05) $ 0.00 $ 0.00 $ 0.00 $ (0.03)
====================================================================================
Pro forma diluted net income per
common share $ 2.79 $ 0.93 $ 0.37 $ 0.38 $ 0.23
====================================================================================
Fiscal Years Ended
------------------------------------------------------------------------------------
DEC. 31, DEC. 31, Dec. 31, Dec. 31, Jan. 1,
(in thousands, except per share amounts) 1998 1997 (1) 1996 (1) 1995 (1) 1995 (1)
- - - -------------------------------------------------------------------------------------------------------------------------
Basic average common shares
outstanding 108,518 101,914 90,582 62,415 48,132
Diluted average common ====================================================================================
shares outstanding (3) 116,882 113,109 95,317 69,328 51,919
====================================================================================
Division Revenue Data:
Information Technology $ 1,164,140 $ 780,634 $ 400,408 $ 61,424 $ 17,600
Professional Services 537,973 383,490 179,608 29,065 18,712
------------------------------------------------------------------------------------
Total revenue $ 1,702,113 $ 1,164,124 $ 580,016 $ 90,489 $ 36,312
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
As of
------------------------------------------------------------------------------------
DEC. 31, DEC. 31, Dec. 31, Dec. 31, Jan. 1,
1998 1997 (1) 1996 (1) 1995 (1) 1995 (1)
====================================================================================
<S> <C> <C> <C> <C> <C>
Balance Sheet data:
Working capital $ 16,138 $ 481,362 $ 397,699 $ 240,252 $ 110,204
Total assets 1,571,881 1,402,626 840,469 303,801 110,578
Long term debt 15,525 434,035 103,369 93,339 28,186
Stockholders' equity 1,070,110 812,842 669,779 195,085 92,142
</TABLE>
(1) Includes the financial information of the Company for the respective years
noted above restated to account for any material business combinations
accounted for under the pooling-of-interests method of accounting.
(2) Pro forma net income is the Company's historical net income less the
approximate federal and state income taxes that would have been incurred,
if the companies with which the Company merged had been subject to tax as a
C Corporation.
(3) Diluted average common shares outstanding have been computed using the
treasury stock method and the as-if converted method for convertible
securities which includes dilutive common stock equivalents as if
outstanding during the respective periods.
(4) Gain on sale relates to the gain on the sale of the net assets of the
Company's discontinued operations. See Note 16 to the Consolidated
Financial Statements for a further discussion.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
During 1998, the Company sold its assets that were unrelated to its Information
Technology and Professional Services divisions. Effective March 30, 1998, the
Company sold the Health Care division for consideration of $8.0 million,
consisting of $3.0 million in cash and $5.0 million in a note receivable due
March 30, 2000 bearing interest at 2% in excess of the prime rate. In addition,
the Company retained the accounts receivable of the Health Care division of
approximately $28.2 million. On September 27, 1998, the Company sold its
Commercial operations and its Teleservices division for $850 million, prior to
any purchase price adjustments, in cash.
As a result of these transactions, the Company's Consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations have been reclassified to report the results of operations
of its Commercial, Teleservices and Health Care divisions as discontinued
operations for all periods presented.
The following detailed analysis of operations should be read in conjunction with
the 1998 Financial Statements and related notes included elsewhere in this Form
10-K.
FISCAL 1998 COMPARED TO FISCAL 1997
Results from continuing operations
Revenue. Revenue increased $538.0 million, or 46.2%, to $1,702.1 million in
fiscal 1998 from $1,164.1 million in fiscal 1997. The increase was attributable
by division to: Information Technology, $383.5 million or an increase of 49.1%
and Professional Services, $154.5 million or an increase of 40.3%. The increases
in the Information Technology and Professional Services divisions were due to
both internal growth and, more significantly, to the revenues of acquired
companies. The revenue for the Company's Information Technology division is
obtained through the modis Solutions and modis Consulting business units. modis
Solutions provided approximately 30.3% and 17.6% of the division's revenue for
the years ended 1998 and 1997, as compared to 69.7% and 82.4% which was provided
by the division's modis Consulting unit during the same respective periods. The
Company plans to continue to expand the percentage of revenue contributed
through its modis Solutions unit as it expands that unit's offerings throughout
the offices of the modis Consulting unit through various cross-selling efforts.
During 1998, the Company solidified the information technology division's
management structure. The Company integrated substantially all of its acquired
companies from a managerial perspective, including 'next generation' leadership.
In conjunction with this integration, the Company has been able to consolidate
its marketing efforts and promote the modis brand name on a national level, as
the majority of its services are now offered under the modis brand name. For
example, a major advertising campaign was launched to increase brand awareness
to customers and recruits through print ads and airport billboards. The Company
believes the managerial integration and unified national marketing plan will
provide the Company with a platform to increase sales. The strong progress in
our integration efforts in 1998 were somewhat attributable to the Company
satisfying all of its domestic contingent earn-out obligations by the end of
1998. The Company will continue to integrate the back office operations of this
division in conjunction with the Company's Restructuring Plan.
In an effort to increase revenue and gross margin percentages, the Company has
rolled out a new incentive based compensation plan throughout the Modis
Consulting unit. The Company believes this plan will better motivate its
employees to stimulate revenue growth and provide an incentive to increase gross
margin percentages.
Management has observed a current trend in the industry which may possibly
enhance the effectiveness of its strategy. This trend involves the movement of
large users of IT services to larger, national and international providers of IT
services. The Company has seen a trend among large national and international
customers towards scaled back, preferred vendor lists for supplying IT services.
The Company believes it is well positioned as one of the companies which can
successfully offer services to these customers and achieve selection as a
preferred provider. Approximately 2.7% of the IT division's total revenue, are
derived from two United Kingdom customers. If these or other customers reduce
spending on IT services or exclude the Company from their vendor lists, then the
fiscal 1999 IT division revenues may experience a decrease if the revenue
associated with such customers cannot be replaced.
Another trend in the industry that may limit the Company's operating strategy
has been articulated by some industry analysts. These industry analysts have
speculated that non Year 2000 related IT spending may be negatively effected in
the third and fourth quarter of fiscal 1999. This theory speculates, among other
things, that customers will focus their efforts in the third and fourth quarters
of fiscal 1999 on testing and implementing legacy systems which have undergone
Year 2000 remediation. The theory further speculates that this focus will result
in a curtailment of spending on such IT services as ERP implementation and
custom software development during 1999. As the Company's modis Solutions unit
provides ERP implementation and custom software development services, if
spending is curtailed , the Company may possibly experience some weakness in its
ERP practice.
The Company's Professional Services division consists of the accounting, legal,
engineering / technical, career management and consulting and scientific units
which contributed 33.5%, 17.1%, 34.1%, 9.0% and 6.3%, respectively, of the
Professional Services division's revenues by group during 1998 as compared to
24.3%, 20.3%, 39.1% 9.6% and 6.7%, respectively, during 1997. The shift in the
Professional Services division's revenues towards the Accounting unit is
primarily the result of the acquisition of a large, international provider of
accounting services during June 1997. This resulted in approximately six months
of post acquisition revenue in fiscal 1997 results versus twelve months during
fiscal 1998. Included in the 1998 revenues of the Professional Services division
are revenues derived from a project in the Company's Legal unit and with a
certain customer. The revenues from this project amounted to approximately $16.1
million, or 3.0% of the division's total revenue. This project is scheduled to
curtail significantly or be completed during the early part of fiscal 1999, and
there is no guarantee that a replacement for that source of revenue will be
found. Projects of this nature occur from time to time within the Professional
Services division. However, management believes it is well positioned to
increase revenue through its existing sales force and makes a concerted effort
to redeploy consultants after such projects end if possible.
During 1999, the Company created and filled the position of President and COO of
the Professional Services division. This position will be responsible for the
operations of all business units of the Professional Services division. The
Company believes this position will create inertia to improve the platform for
better operational results throughout the entire professional services division.
Gross Profit. Gross profit increased $139.1 million, or 42.3%, to $467.6 million
in fiscal 1998 from $328.5 million in fiscal 1997. Gross margin decreased to
27.5% in fiscal 1998 from 28.2% in fiscal 1997. The gross margin in the IT
division decreased from 26.8% to 25.9%. The overall decrease in the IT
division's gross margin was due to a number of factors, including: (1) the
increased percentage of the Information Technology division's revenues generated
by the U.K. operations, which generally contribute a lower gross margin
percentage; (2) in certain cases, the inability of the Company to time increases
in bill rates with increases in pay rates (3) higher benefits costs including
mathcing 401(k) plan and holiday and vacation pay; (4) inability to use more
salaried versus hourly consultants; and (5) the overall decrease in gross margin
percentages in the information technology services industry as a whole. This
industry decrease may be attributed to the aforementioned trend by large users
of IT services toward scaled back preferred vendor lists. The aim of such vendor
list reductions is to push greater services revenue through fewer providers with
the tradeoff being lower gross margin percentages to the providers. If in the
future a greater portion of the Company's revenues are generated through
preferred vendor contracts, it is possible that this may result in a decrease in
gross margin percentages, although gross margin dollars may increase. The
decrease in gross margin percentages in the information technology services
industry may also be attributed to a continued shortage of skilled IT workers
worldwide. The current shortage of skilled IT workers creates an upward pressure
on pay rates for such workers. If the Company must continue to pay higher wages
to attract and retain skilled workers and is not able to completely pass this
increase through to its customers, this may result in somewhat depressed gross
margin percentages. The gross margin in the Professional Services division
decreased to 30.8% in fiscal 1998 from 31.1% in fiscal 1997. The overall
decrease in the Professional Services gross margin was due primarily to an
increased percentage of revenues from the United Kingdom, increased salary
pressures due to a continued shortage of skilled workers, higher benefits costs
including a matching 401(k) plan and holiday and vacation pay, and increased
competition within the segment including downward pricing pressure from
competitors.
Operating Expenses. Operating expenses increased $124.7 million, or 58.9%, to
$336.4 million in fiscal 1998 from $211.7 million in fiscal 1997. Included in
operating expenses in fiscal 1998 are $34.8 million in restructuring and
impairment charges associated with the Company's Integration and Strategic
Repositioning Plan (the 'Restructuring Plan'). Operating expenses before these
non-recurring costs as a percentage of revenue decreased to 17.7% in fiscal
1998, from 18.2% in fiscal 1997. The decrease was due to the Company's ability
to spread its expenses over a larger revenue base. The Company's general and
administrative ("G&A") expenses before the non-recurring charges increased $75.3
million or 39.8% to $264.6 million in fiscal 1998 from $189.3 million in fiscal
1997. The increase in G&A expenses was primarily related to: the effects of
acquisitions made by the Company, internal growth of the operating companies
post-acquisition, investments made to improve infrastructure and to develop
technical practices and increased expenses at the corporate level to support the
growth of the Company including sales, marketing and brand recognition. Included
in G&A expenses during both 1998 and 1997 are the costs associated with projects
underway to ensure accurate date recognition and data processing with respect to
the Year 2000 as it relates to the Company's business, operations, customers and
vendors. These costs have been immaterial to date and are not expected to have a
material impact on the Company's results of operations, financial condition or
liquidity in the future. See 'OTHER MATTERS - Year 2000 Compliance' below.
Restructuring and impairment charge. In December 1998, the Company's Board of
Directors approved a restructuring plan to strengthen overall profitability of
the Company by implementing a back office integration program and branch
repositioning plan in an effort to consolidate or close branches whose financial
performance does not meet the Company's expectations. The Company recorded a
restructuring and impairment charge of $34.8 million in relation to the
Restructuring Plan. The restructuring component of the $34.8 million charge is
based, in part, on the evaluation of objective evidence of probable obligations
to be incurred by the Company or of specifically identified assets.
The Company, formerly AccuStaff Incorporated, was formed in 1992 and grew over
the next 6 1/2 years through both acquisitions and internal growth. Prior to the
disposition of the Commercial operations and the Teleservices and Health Care
divisions in 1998, the Company was largely organized and structured from an
administrative, operations and systems capabilities standpoint as a commercial
staffing business. The Restructuring Plan focuses on meeting the needs of an
information technology and professional services company and is designed to
result in a back office environment tailored to serve these businesses. Upon
completion of the Restructuring Plan, certain back office operations will be
centralized at the Company's headquarters and possibly one additional location,
and certain positions which were necessary under the previous organizational and
operational structure will be eliminated.
The Restructuring Plan calls for the consolidation or closing of 23 Professional
Services division branches, certain organizational improvements and the
consolidation of 15 back office operations. This restructuring, which will
result in the elimination of approximately 290 positions, will be completed over
a 12- to 18-month period. The reduction in annualized revenue and operating
losses from the consolidation or closing of the 23 Professional Services
branches is estimated to be $12.0 million and $4.9 million, respectively. In
addition, the Company estimates an annual operating cost reduction of $10.1
million as a result of the consolidation of the back office operations. The
Company expects to begin to realize the benefits of the cost reductions in the
third quarter of 1999 and realize the majority of the annualized benefits in
fiscal 2000.
The major components of the restructuring and impairment plan include:(1) costs
to recognize severance and related benefits for the approximately 290 employees
to be terminated of $7.5 million. The severance and related benefit accruals are
based on the Company's severance plan and other contractual termination
provisions. These accruals include amounts to be paid to employees upon
termination of employment. Prior to December 31, 1998, management had approved
and committed the Company to a plan that involved the involuntary termination of
certain employees. The benefit arrangements associated with this plan were
communicated to all employees in December 1998. The plan specifically identified
the number of employees to be terminated and their job classifications, (2)
costs to write down certain furniture, fixtures and computer equipment to net
realizable value at branches not performing up to the Company's expectations of
$2.5 million,(3) costs to write down goodwill associated with the acquisition of
Legal Information Technology, Inc. which was acquired in January, 1996,
calculated in accordance with SFAS 121 as described in Note 2 to the
Consolidated Financial Statements, Summary of Significant Accounting Policies -
Goodwill of $9.9 million, (4) costs to terminate leases and other exit and
shutdown costs associated with the consolidated or closed branches and
back-office operations, including closing the facilities of $8.0 million, and
(5) costs to adjust accounts receivable due to the expected increase in bad
debts which results directly from the termination of employees which causes a
change in client relationships which results when severed branch and back-office
administrative employees, who have the knowledge to effectively pursue
collections are terminated of $6.8 million. These costs were based upon
management's best estimates based upon available information.
Since payments pursuant to the Restructuring Plan will not commence until fiscal
1999, there were no charges recognized by the Company against the restructuring
reserve as of December 31, 1998, at which time the total restructuring reserve
amount of $24.8 million (which does not include the $9.9 million goodwill
impairment charge which was recorded against goodwill in the fouth quarter of
fiscal 1999) was included in accounts payable and accrued liabilities Since
payments pursuant to the Restructuring Plan will not commence until fiscal 1999.
Income from Operations. Income from operations increased $14.4 million, or
12.3%, to $131.2 million in fiscal 1998 from $116.8 million in fiscal 1997.
Income from operations before non-recurring integration and impairment charges
increased $49.2 million, or 42.1%, to $166.0 million in fiscal 1998 from $116.8
million in fiscal 1997. Income from operations before non-recurring integration
and impairment costs as a percentage of revenue decreased to 9.7% in fiscal 1998
from 10.0% in fiscal 1997.
Other Income (Expense). Interest expense increased $9.1 million, or 56.9%, to
$25.1 million in fiscal 1998 from $16.0 million in fiscal 1997. The increase in
interest expense resulted from the utilization of the Company's credit facility.
The increase in interest expense was partially offset by interest and other
income of $11.1 from primarily four sources: (1) the sale of the Company's
Commercial and teleservices divisions and the resultant net cash proceeds of
approximately $373.0 million (net of $477.0 million used to pay off and
terminate the Company's then existing credit facility) which earned interest
income from October 1, 1998 through December 31, 1998; (2) the resulting
interest expense savings from October 1, 1998 through December 31, 1998 from
paying off the existing credit facility (the new facility did not have a balance
as of December 31, 1998); (3) investment income from certain investments owned
by the Company; and (4) interest income earned from cash on hand at certain
subsidiaries of the Company.
Income Taxes. The Company's effective tax rate was 41.2% in fiscal 1998 compared
to 38.0% in fiscal 1997. The increase in the effective tax rate was due to the
increase in taxable income which resulted from the recording of approximately
$9.9 million in non-deductible goodwill impairment charges (included in the
restructuring and impairment charge discussed above and in Note 12 to the
Consolidated Financial Statements included elsewhere herein) during fiscal 1998.
Absent these impairment charges, the Company's effective tax rate would have
remained constant at 38.0% for fiscal 1998 compared to fiscal 1997. Due to the
increase in certain non-deductible expense items, the majority of which is
non-deductible goodwill amortization resulting from tax-free mergers accounted
for under the purchase method of accounting, the Company's effective tax rate
will increase in fiscal 1999.
Income from continuing operations. As a result of the foregoing, income from
continuing operations increased $5.5 million, or 8.7%, to $68.9 million in 1998
from $63.4 million in fiscal 1997. Income from continuing operations as a
percentage of revenue decreased to 4.0% in fiscal 1998 from 5.4% in fiscal 1997,
due primarily to the decrease in income attributable to the recording of the
integration and impairment charge, and the increase in the effective income tax
rate due to the non-deductible goodwill impairment charge. Exclusive of these
non-recurring costs, income from continuing operations during 1998 would have
increased $30.7 million to $94.1 million, increasing income from continuing
operations as a percentage of revenue to 5.5%.
Results from discontinued operations
Income from discontinued operations, after income taxes, totaled $30.0 million
for fiscal 1998, a decrease of 22.5%, compared to $38.7 million for fiscal 1997.
Reported revenues from discontinued operations were $919.4 million for fiscal
1998 versus $1,260.7 million for fiscal 1997. Operating income for the
discontinued operations was $54.3 million for fiscal 1998 versus $69.8 million
during fiscal 1997. Results of discontinued operations include allocations of
consolidated interest expense totaling $4.2 million and $4.4 million for fiscal
1998 and 1997, respectively. The allocations were based on the historic funding
needs of the discontinued operations, including: the purchases of property,
plant and equipment, acquisitions, current income tax liabilities and
fluctuating working capital needs. Due to the sale of the Commercial operations
and Teleservices division on September 27, 1998, and the sale of the Health Care
division on March 30, 1998, fiscal 1998 operations include operations for only
nine months of the Commercial operations and Teleservices division and only
three months of the Health Care division, compared to twelve months in 1997.
Extraordinary item
During the fourth quarter of fiscal 1998, the Company recognized an
extraordinary after-tax charge of $5.6 million as a result of the Company's
early retirement of $16.5 million of 7% Convertible Senior Notes Due 2002, which
could have been converted into 1,449,780 shares of the Company's Common Stock,
and the termination of the Company's existing credit facility immediately
subsequent to the sale of the Company's Commercial operations and Teleservices
division. The Company paid a premium of $7.1 million on the early extinguishment
of the Senior Convertible Notes and wrote off $0.37 million of related
unamortized debt issuance costs. Additionally, the Company wrote off $1.6
million of unamortized debt financing costs related to the termination of the
credit facility. See Note 4 to the Consolidated Financial Statements for further
information on these transactions.
<PAGE>
FISCAL 1997 COMPARED TO FISCAL 1996
Results from continuing operations
Revenue. Revenue increased $584.1 million, or 100.7%, to $1,164.1 million in
fiscal 1997 from $580.0 million in fiscal 1996. The increase was attributable by
division to: Information Technology, $380.2 million or an increase of 95.0% and
Professional Services, $203.9 million or an increase of 113.5%. The increases in
the Information Technology and Professional Services divisions were due to both
internal growth and, more significantly, to the revenues of acquired companies.
The revenue for the Company's Information Technology division is obtained
through the modis Solutions and modis Consulting business units. modis Solutions
provided approximately 17.6% and 18.4% of the division's revenue for the years
ended 1997 and 1996 as compared to 82.4% and 81.6% which was provided by the
division's modis Consulting unit during the same respective periods. The
Company's Professional Services division consists of the accounting, legal,
engineering/technical, career management and consulting and scientific groups
which contributed 24.3%, 20.3%, 39.1%, 9.6% and 6.7%, respectively, of the
Professional Services division's revenues by group during 1997 as compared to
8.8%, 15.1%, 74.0%, 0.0% and 2.1%, respectively, during 1996. The mix shift
among the units within the Professioanl Services division was primarily due to
the timing of acquisitions during fiscal 1996 and 1997.
Gross Profit. Gross profit increased $175.3 million, or 114.4%, to $328.5
million in fiscal 1997 from $153.2 million in fiscal 1996. Gross margin
increased to 28.2% in fiscal 1997 from 26.4% in fiscal 1996. The gross margin in
the IT division remained relatively constant in 1997 at 26.8% compared with
26.9% in fiscal 1996. The gross margin in the Professional division increased to
31.1% in fiscal 1997 compared to 25.2% in fiscal 1996. The increase in the
Professional Services division's gross margin was due primarily to the
substantial increase in revenue contribution by the divisions higher margin
accounting, legal and career management and consulting units.
Operating Expenses. Operating expenses increased $89.8 million, or 73.6%, to
$211.7 million in fiscal 1997 from $122.0 million in fiscal 1996. Included in
operating expenses in fiscal 1996 is $14.4 million in merger related expenses
associated with the merger of the Company with Career Horizons, Inc. Operating
expenses before merger related costs as a percentage of revenue decreased to
18.2% in fiscal 1997, from 18.5% in fiscal 1996. The decrease was due to the
Company's ability to spread its expenses over a larger revenue base. The
Company's G&A expenses increased $92.1 million or 94.8% to $189.3 million in
fiscal 1997 from $97.2 million in fiscal 1996. The increase in G&A expenses was
primarily related to: the effects of acquisitions made by the Company, internal
growth of the operating companies post-acquisition, investments made to improve
infrastructure and to develop technical practices and higher expenses at the
corporate level to support the growth of the Company. Included in G&A expenses
during 1997 are the costs associated with projects underway to ensure accurate
date recognition and data processing with respect to the Year 2000 as it relates
to the Company's business, operations, customers and vendors. These costs have
been immaterial to date and are not expected to have a material impact on the
Company's results of operations, financial condition or liquidity in the future.
See 'OTHER MATTERS - Year 2000 Compliance' below.
Income from Operations. As a result of the foregoing, income from operations
increased $85.5 million, or 273.8%, to $116.8 million in fiscal 1997 from $31.2
million in fiscal 1996. Income from operations before non-recurring merger
related costs increased $71.1 million, or 155.6%, to $116.8 million in fiscal
1997 from $45.7 million in fiscal 1996. Income from operations before
non-recurring merger related costs as a percentage of revenue increased to 10.0%
in fiscal 1997 from 7.9% in fiscal 1996.
Interest Expense. Interest expense increased $9.2 million, or 135.3%, to $16.0
million in fiscal 1997 from $6.8 million in fiscal 1996. The increase in
interest expense resulted from use of the Company's credit facility. The
borrowings from the Company's credit facility were primarily used for the
purchases of businesses.
Income Taxes. The Company's effective tax rate was 38.0% in fiscal 1997 compared
to 56.7%, including the effect of the pro forma tax provision, in fiscal 1996.
The decrease in the effective tax rate was due to the higher level of taxable
income in 1996 as a result of the non-deductible, non-recurring merger related
costs in connection with the acquisitions of The McKinley Group, Inc., HJM
Consulting, Inc. and Career Horizons, Inc. during 1996.
Income from continuing operations. As a result of the foregoing, income from
continuing operations increased $54.8 million, or 637.2%, to $63.4 million in
1997 from $8.6 million in fiscal 1996. Income from continuing operations as a
percentage of revenue increased to 5.4% in fiscal 1997 from 1.5% in fiscal 1996,
due primarily to the reduction of merger related costs during 1997 and the
acquisition of cash-basis S-corporations accounted for under the pooling of
interests method of accounting, which required a one-time increase to the
current period income tax provision during 1996. Exclusive of these costs,
income from continuing operations during 1996 would have increased $10.8 million
to $19.4 million, increasing pro forma net income as a percentage of revenue to
3.3%.
Results from discontinued operations
Income from discontinued operations, after income taxes, increased $16.1
million, or 71.2%, to $38.7 million for fiscal 1997 versus $22.6 million for
fiscal 1996. Reported revenues from discontinued operations were $1,260.7
million for fiscal 1997 versus $1,031.4 million for fiscal 1996. Operating
income for the discontinued operations was $69.8 million for fiscal 1997 versus
$42.1 million during fiscal 1996. Results of discontinued operations include
allocations of consolidated interest expense totaling $4.4 million and $0.4
million for fiscal 1997 and 1996, respectively. The allocations were based on
the historic funding needs of the discontinued operations, including: the
purchases of property, plant and equipment, acquisitions, current income tax
liabilities and fluctuating working capital needs.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have principally related to the acquisition
of businesses, working capital needs and capital expenditures. These
requirements have been met through a combination of bank debt, issuances of
Common Stock and internally generated funds. The Company's operating cash flows
and working capital requirements are affected significantly by the timing of
payroll and by the receipt of payment from the customer. Generally, the Company
pays its Information Technology and Professional Services consultants
semi-monthly, and receives payments from customers within 30 to 80 days from the
date of invoice.
Exclusive of the net assets of discontinued operations, the Company had working
capital of $16.1 million and $115.3 million as of December 31, 1998 and 1997,
respectively. Included in current liabilities during fiscal 1998 and 1997 were
amounts related to earn-out payments due to the former owners of acquired
companies. These amounts were paid in the first quarter of fiscal 1999 and 1998,
respectively, and capitalized to the goodwill balances related to the respective
acquired companies. The Company had cash and cash equivalents of $105.8 million
and $23.9 million as of December 31, 1998 and 1997, respectively. The principal
reason for the decrease in the Company's working capital is that the Company has
recognized a $175.0 million current tax liability as of December 31, 1998
relating to the sale of its Commercial operations and Teleservices division. The
majority of the proceeds from the sale have been used to pay down long-term debt
under its credit facility (which did not have a balance as of December 31, 1998)
and to repurchase the Company's Common Stock. For the year ended December 31,
1998, the Company generated $88.9 million of cash flow from operations. For the
year ended December 31, 1997, the Company generated $39.0 million of cash flow
from operations. For the year ended December 31, 1996, the Company generated
$6.0 million of cash flow from operations. The large increase in cash flows from
operations during fiscal 1998 versus fiscal 1997 is mainly due to the cash flow
provided from acquired companies. The majority of the Company's acquisitions
occurred throughout the year ended December 31, 1997. Due to the timing of the
acquisitions, the cash flow from operations has increased substantially through
the year ended December 31, 1998.
For the year ended December 31, 1998, the Company generated $645.0 million of
cash flow from investing activities, as a result of net proceeds received in the
year ended December 31, 1998 from the Company's sale of its Commercial
operations and Teleservices division, of $840.9 million. The balance of $195.9
million relates to cash the Company used for acquisitions of $157.1 million, for
capital expenditures of $22.9 million, and advances related to the sale of its
Healthcare division of $15.9 million.
The Company will make payments of approximately $38.0 million in the first
quarter of 1999 related to the net worth adjustment and certain transaction
expenses associated with the sale of its Commercial operations and Teleservices
division. In addition, during the first quarter of fiscal 1999, the Company will
make tax payments of approximately $175.0 million related to the gain on the
sale of these businesses. In addition, the Company is subject to claims for
indemnification arising from the sales of its Commercial operations and
Teleservices division and its Health Care division in 1998. For the year ended
December 31, 1998, the Company did not pay any indemnification claims. Although
the Company has received certain claims for indemnification or notices of
possible claims pursuant to such obligations, the Company believes that it has
meritorious defenses against such claims and does not believe that such claims,
if successful, would have a material adverse effect on the Company's financial
condition or results of operations.
In connection with the Company's sale of its Health Care operations, the Company
entered into an agreement with the purchaser of the Health Care operations
whereby the Company agreed to make advances to the purchaser to fund its working
capital requirements. Any amounts extended are collateralized by the accounts
receivable and certain other assets of the related health care operations. Any
advances made under this agreement accrue interest at 10% per year. As of
December 31, 1998, the Company had advanced approximately $15.9 million under
this agreement.
For the years ended December 31, 1997 and 1996, the Company used $365.9 million
and $275.3 million, respectively, for investing activities, of which $357.8
million, and $306.0 million, respectively, were used for acquisitions and $8.1
million, and $7.3 million, respectively, were used for capital expenditures. The
Company made thirteen, twenty and thirty-one acquisitions in each of the years
ended December 31, 1998, 1997 and 1996, respectively.
For the year ended December 31, 1998, the Company used $658.6 million for
financing activities of which $309.7 million was used to repurchase the
Company's Common Stock, $349.5 million which represents net repayments on
borrowings from the Company's credit facility and notes issued in connection
with the acquisition of certain companies, $23.6 million related to the
repurchase of the Company's 7% Convertible Senior Notes Due 2002, and $24.2
million related to the proceeds from stock options exercised. The repayments
were mainly funded from the sale of the Company's Commercial operations and
Teleservices division.
On October 31, 1998, the Company's Board of Directors authorized the repurchase
of up to $200.0 million of the Company's Common Stock pursuant to a share
buyback program. On December 4, 1998, the Company's Board of Directors increased
the authorized share buyback program by an additional $110.0 million, bringing
the total authorized repurchase amount to $310.0 million. As of December 31,
1998, the Company had repurchased approximately 21,751,000 shares under the
share buyback program. Included in the shares repurchased as of December 31,
1998 were approximately 6,150,000 shares repurchased under an accelerated stock
acquisition plan ("ASAP"). The Company entered into the ASAP with a certain
brokerage firm which agreed to sell to the Company shares of its Common Stock at
a certain cost. The brokerage firm borrowed these shares from its customers and
was required to enter into market transactions, subject to Company approval, and
purchase shares of Company Common Stock to return to its customers. The Company,
pursuant to the ASAP, agreed to compensate the brokerage firm for any increases
in the Company's stock price that would cause the brokerage firm to pay an
amount to purchase the stock over the ASAP price. Conversely, the Company would
receive a refund in the purchase price if the Company's stock price fell below
the ASAP price. Subsequent to December 31, 1998, the Company used refunded
proceeds from the ASAP to complete the program during January and February 1999,
with the repurchase of approximately 597,000 shares, bringing the total shares
repurchased under the program to approximately 22,348,000 shares. All of these
shares were retired upon purchase.
For the years ended December 31, 1997 and 1996, the Company generated $335.8
million and $405.1 million, respectively, of cash flow from financing
activities. During fiscal 1997, this amount primarily represented net borrowings
from the Company's credit facility, which were used primarily to fund
acquisitions. During fiscal 1996, the Company generated the majority of its cash
flows from financing activities through the public sale of Company Common Stock.
The Company is also obligated under various acquisition agreements to make
earn-out payments to former stockholders of acquired companies over the next
four years. The Company estimates that the amount of these payments will total
$82.6 million, $26.2 million, $10.1 million and $2.9 million annually, for the
next four years. Included in the balance sheet in line item "Accounts payable
and accrued expenses" is $65.2 million related to estimated earnout payments
that were determinable at December 31, 1998. The Company anticipates that the
cash generated by the operations of the acquired companies will provide a
substantial part of the capital required to fund these payments.
The Company anticipates that capital expenditures for furniture and equipment,
including improvements to its management information and operating systems
during the next twelve months will be approximately $15.0 million. The Company
anticipates recurring expenditures in future years to be approximately $10.0
million per year.
The Company believes that funds provided by operations, available borrowings
under the credit facility, and current amounts of cash will be sufficient to
meet its presently anticipated needs for working capital, capital expenditures
and acquisitions for at least the next 12 months.
<PAGE>
Indebtedness of the Company
Prior to the sale of the Company's Commercial operations and Teleservices
division, the Company had a $500 million credit facility which was syndicated to
a group of 20 banks, with NationsBank, N.A. as principal agent. Immediately
subsequent to the sale of the Company's Commercial operations and Teleservices
division, that facility was completely repaid and terminated. In connection with
this termination, the Company wrote off unamortized debt issuance costs of $1.63
million.
On October 30, 1998, the Company entered into a new $500 million revolving
credit facility which is syndicated to a group of 13 banks with NationsBank,
N.A. as the principal agent. The facility expires on October 21, 2003.
Outstanding amounts under the credit facility will bear interest at certain
floating rates as specified by the credit facility. The credit facility contains
certain financial and non-financial covenants relating to the Company's
operations, including maintaining certain financial ratios. Repayment of the
credit facility is guaranteed by the material subsidiaries of the Company. In
addition, approval is required by the majority of the lenders when the cash
consideration of an individual acquisition exceeds 10% of consolidated
stockholders' equity of the Company.
As of March 19, 1999, the Company had a balance of approximately $150.0 million
outstanding under the credit facility. The Company also had outstanding letters
of credit in the amount of $7.8 million, reducing the amount of funds available
under the credit facility to approximately $342.2 million as of March 19, 1999.
On October 16, 1995, Career Horizons, Inc., issued $86.25 million of 7%
Convertible Senior Notes Due 2002 which were assumed by the Company pursuant to
the merger with Career Horizons, Inc. Interest on the Notes were paid
semiannually on May 1 and November 1 of each year. The Notes were convertible at
the option of the holder thereof, unless previously redeemed, into shares of
Common Stock of the Company at a conversion price of $11.35 per share. The Notes
were redeemable, in whole or in part, at the option of the Company, at any time
on or after November 1, 1998, at stated redemption prices, together with accrued
interest. The Company called the Notes on October 1, 1998, to be either redeemed
or converted as of November 1, 1998. Prior to November 1, 1998, $16.45 million
of Notes were redeemed by the Company, at a premium of $7.13 million, and $69.80
million were converted into shares of Common Stock of the Company. Additionally,
the Company wrote off unamortized debt issuance costs of approximately $.37
million associated with the redemption and increased paid-in-capital by $1.5
million for unamortized debt issuance costs associated with the conversion.
The Company has certain notes payable to shareholders of acquired companies
which bear interest at rates ranging from 5.0% to 8.0% and have repayment terms
from January 1999 to November 2004. As of December 31, 1998, the Company owed
approximately $31.5 million in such acquisition indebtedness.
<PAGE>
INFLATION
The effects of inflation on the Company's operations were not significant during
the periods presented in the financial statements. Generally, throughout the
periods discussed above, the increases in revenue have resulted primarily from
higher volumes, rather than price increases.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the American Institute of Certified Public Accountants' Executive
Committee issued Statement of Position Number 98-1 (SOP 98-1), "Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use". SOP 98-1
is effective for fiscal years beginning after December 15, 1998. Management
believes that the Company is substantially in compliance with this pronouncement
and that the implementation of this pronouncement will not have a material
effect on the Company's consolidated financial position, results of operations
or cash flows. Implementation is planned for fiscal 1999.
During 1998, the American Institute of Certified Public Accountants' Executive
Committee issued Statement of Position Number 98-5 (SOP 98-5), "Reporting on the
Costs of Start-Up Activities". SOP 98-5 is effective for fiscal years beginning
after December 15, 1998. Management does not believe that its adoption will have
a material effect on the Company's consolidated financial position or results of
operations. Implementation is planned for fiscal 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and for Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999, and cannot be applied retroactively. We
have not yet quantified the impacts of adopting SFAS No. 133 on our financial
statements; however, SFAS No. 133 could increase the volatility of reported
earnings and other comprehensive income once adopted.
<PAGE>
OTHER MATTERS
Year 2000 Compliance
The following disclosure is a Year 2000 Readiness disclosure statement pursuant
to the Year 2000 Readiness and Disclosure Act.
During 1997 the Company began projects to address potential problems within the
Company's operations which could result from the century change in the Year
2000. In 1998, the Company created a Year 2000 Project Office to oversee Year
2000 related projects and to address potential problems within the Company's
operations, which could result from the century change in the Year 2000. The
Project Office reports to the Company's Board of Directors and is staffed
primarily with representatives of the Company's Information Systems Department,
and has access to key associates in all areas of the Company's operations. The
Project Office also uses outside consultants on an as-needed basis.
A four-phase approach has been utilized to address the Year 2000 issues: (1) an
inventory phase to identify all computer-based systems and applications
(including embedded systems) which might not be Year 2000 compliant; (2) an
assessment phase to determine what revisions or replacements would be necessary
to achieve Year 2000 compliance and identification of remediation priorities
which would best serve the Company's business interests; (3) a conversion phase
to implement the actions necessary to achieve compliance and to conduct the
tests necessary to verify that the systems are operational; and (4) an
implementation phase to transition the compliant systems into the everyday
operations of the Company. Management believes that the four phases are
approximately 100%, 100%, 75%, and 65% complete, respectively.
The Company's corporate accounting, payroll and human resources systems are
recent implementations (installed since June 1997) of mainstream computer
products from vendors such as PeopleSoft, Informix, Microsoft, Digital Equipment
Corporation and Compaq. The Company is near completion of Year 2000 required
upgrades for corporate hardware systems, operating systems, network systems,
database systems and applications systems. This project is in process, and on
schedule with an anticipated completion date of May 1999.
The Company operates approximately 264 branches, primarily in the U.S., Canada
and the United Kingdom. The branch network relies on a variety of front office
automation systems to provide sales support for resume tracking and client
contact management. Because of the diverse architectural nature of these systems
together with the relative ease with which backup/contingency procedures can be
implemented in the event of an individual branch system outage, the Company does
not believe that these systems pose a material Year 2000 risk. Nevertheless, the
Company has completed Inventory and Assessment phases for all branch locations.
In conjunction with other business related integration projects, the Company is
actively replacing noncompliant Year 2000 branch hardware and software with Year
2000 compliant products. The Company expects that this replacement process will
be complete in July 1999. To date, the Company has found that less than 10% of
branch workstations require hardware or software upgrades for Year 2000
purposes.
Milestones and implementation dates and the cost of the Company's Year 2000
readiness program are subject to change based on new circumstances that may
arise or new information becoming available, that may change underlying
assumptions or requirements. Further, there are no assurances that the Company
will identify all data handling problems in its business systems or that the
Company will be able to successfully remedy Year 2000 items that are discovered.
Non-IT systems have also been assessed and inventoried. Potential Year 2000
risks in these systems includes landlord-controlled systems, such as heating and
cooling systems, automated security systems, elevators, and office equipment,
phone systems, facsimile machines and copiers. The Company has requested
assessments of non-IT systems for Year 2000 compliance from landlords and office
equipment vendors. Based on these responses that the Company has received, the
Company believes that the Year 2000 risk of non-IT systems failure is not
material.
The Company has budgeted approximately $2.0 million to address the Year 2000
issues, which includes the estimated cost of the salaries of associates and the
fees of consultants addressing the issue. This cost represents approximately 10%
of the Company's total MIS budget. Approximately $1.3 has been incurred to date
for outside consultants, software and hardware applications, and dedicated
personnel. The Company does not separately track the internal costs incurred for
portions of the Year 2000 compliance project that are completed as a part of
other business related projects. Such costs are principally the related payroll
costs for the Company's information systems group. The Company believes that
cash flows from operations and funds available under the Company's credit
facility as well as cash on hand are sufficient to fund these costs.
As a part of the Year 2000 review, the Company is examining its relationships
with certain key outside vendors and others with whom it has significant
business relationships to determine to the extent practical the degree of such
parties' Year 2000 compliance and to develop strategies and alternatives for
working with them through the century change. Other than its banking
relationships, which include only large, federally insured institutions, and
utilities (electrical power, telecommunications, water and related items), the
Company does not have a relationship with any third-party which is material to
the operations of the Company and, therefore, believes that the failure of any
such party to be Year 2000 compliant would not have a material adverse effect on
the Company. However, banking or utility failures at the Company's branches or
with its customers could have a material effect on the Company's revenue sources
and could disrupt the payment cycle of certain of the Company's customers.
Should the Company or a third party with whom the Company deals have a systems
failure due to the century change, the Company does not expect any such effect
to be material. The Company is developing contingency plans for alternative
methods of transaction processing and estimates that such plans will be
finalized by August 1999.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following assessment of the Company's market risks does not include
uncertainties that are either nonfinancial or nonquantifiable, such as
political, economic, tax and other credit risks.
Interest Rates. The Company's exposure to market risk for changes in interest
rates relates primarily to the Company's short-term and long-term debt
obligations and to the Company's investments.
The Company's investment portfolio consists of cash and cash equivalents
including deposits in banks, government securities, money market funds, and
short-term investments with maturities, when acquired, of 90 days or less. The
Company is adverse to principal loss and ensures the safety and preservation of
its invested funds by placing these funds with high credit quality issuers. The
Company constantly evaluates its invested funds to respond appropriately to a
reduction in the credit rating of any investment issuer or guarantor.
The Company's short-term and long-term debt obligations totaled $31.5 million as
of December 31, 1998 and the Company had $477.1 million available under its
current credit facility. The debt obligations consist of notes payable to former
shareholders of acquired corporations, are at a fixed rate of interest, and
extend through 2004. The interest rate risk on these obligations is thus
immaterial due to the dollar amount and fixed nature of these obligations. The
interest rate on the credit facility is variable, but there were no amounts
outstanding on the facility as of December 31, 1998.
Foreign currency exchange rates. Foreign currency exchange rate changes impact
translations of foreign denominated assets and liabilities into U.S. dollars and
future earnings and cash flows from transactions denominated in different
currencies. The Company generated approximately 19% of fiscal 1998 consolidated
revenues from international operations, 93% of which were from the United
Kingdom and 7% of which were from other countries. Thus, 93% of international
revenues were derived from the United Kingdom, whose currency has not fluctuated
materially against the United States dollar in fiscal 1998. Foreign exchange
translation gains and losses have been and are as of December 31, 1998
immaterial. The Company did not hold or enter into any foreign currency
derivative instruments as of December 31, 1998.
<PAGE>
FACTORS WHICH MAY IMPACT FUTURE RESULTS AND FINANCIAL CONDITION
Effect of Fluctuations in the General Economy
Demand for the Company's information technology and professional business
services is significantly affected by the general level of economic activity in
the markets served by the Company. During periods of slowing economic activity,
companies may reduce the use of outside consultants and staff augmentation
services prior to undertaking layoffs of full-time employees. Also during such
periods, companies may elect to defer installation of new information technology
systems and platforms (such as Enterprise Resource Planning systems) or upgrades
to existing systems and platforms. Year 2000 remediation and testing for
existing information technology systems may have a similiar effect. As a result,
any significant economic downturn or Year 2000 impact could have a material
adverse effect on the Company's results of operations or financial condition.
The Company may also be adversely effected by consolidations through mergers and
otherwise of main customers or between major customers with non-customers. These
consolidations as well as corporate downsizings may result in redundant
functions or services and a resulting reduction in demand by such customers for
the Company's services. Also, spending for outsourced business services may be
put on hold until the consolidations are completed.
Competition
The Company's industry segments are intensely competitive and highly fragmented,
with few barriers to entry by potential competitors. The Company faces
significant competition in the markets that it serves and will face significant
competition in any geographic market that it may enter. In each market and
industry segment in which the Company operates, it competes for both clients and
qualified professionals with other firms offering similar services. Competition
creates an aggressive pricing environment and higher wage costs, which puts
pressure on gross margins.
Ability to Recruit and Retain Professional Employees
The Company depends on its ability to recruit and retain employees who possess
the skills, experience and/or professional certifications necessary to meet the
requirements of the Company's clients. Competition for individuals possessing
the requisite criteria is intense, particularly in certain specialized IT and
professional skill areas. The Company often competes with its own clients in
attracting and retaining qualified personnel. There can be no assurance that
qualified personnel will be available and recruited in sufficient numbers on
economic terms acceptable to the Company.
The continuing shortage of qualified IT consultants may adversely affect the
Company's ability to increase revenue. This shortage may be exacerbated by the
difficulties of utilizing the services of qualified foreign nationals working in
the United States under H-1B visas. The use of these consultants requires both
the Company and these foreign nationals to comply with United States immigration
laws.
Ability to Continue Acquisition Strategy; Ability to Integrate Acquired
Operations
The Company has experienced significant growth in the past through acquisitions.
Although the Company continues to seek acquisition opportunities, there can be
no assurance that the Company will be able to negotiate acquisitions on economic
terms acceptable to the Company or that the Company will be able to successfully
identify acquisition candidates and integrate all acquired operations into the
Company.
Possible Changes in Governmental Regulations
From time to time, legislation is proposed in the United States Congress, state
legislative bodies and by foreign governments that would have the effect of
requiring employers to provide the same or similar employee benefits to
consultants and other temporary personnel as those provided to full-time
employees. The enactment of such legislation would eliminate one of the key
economic reasons for outsourcing certain human resources and could significantly
adversely impact the Company's staff augmentation business. In addition, the
Company's costs could increase as a result of future laws or regulations that
address insurance, benefits or other employment-related matters. There can be no
assurance that the Company could successfully pass any such increased costs to
its clients.
Possible Year 2000 Exposure
The IT division performs both Year 2000 remediation services as well as system
upgrades and enhancements for clients. There is some possibility that customers
who experience system failures related to Year 2000 may institute actions
against their IT vendors, including the Company. There is no ability to quantify
the likelihood or merit of any such claims; but if a significant number of such
claims are asserted against the Company or if one or more customers assert
meritorious claims, such claims may result in material adverse effects on the
Company's results of operations and financial condition.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Consolidated Financial Statements: The following consolidated financial
statements are included in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Public Accountants
Covered by the Report of Independent Public Accountants:
Consolidated Balance Sheet at December 31, 1998 and 1997
Consolidated Statements of Income for the years ended
December 31, 1998, 1997, and 1996
Consolidated Statements of Stockholders' Equity at
December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996
Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Modis Professional Services, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity, and of cash flows
present fairly, in all material respects, the financial position of Modis
Professional Services, Inc. (formerly AccuStaff Incorporated) and its
Subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
March 26, 1999
<PAGE>
Modis Professional Services Inc. and Subsidiaries
Consolidated Balance Sheets.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(dollar amounts in thousands except per share amounts) 1998 1997
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 105,816 $ 23,938
Accounts receivable, net of allowance of $13,007 and $8,945 327,185 230,934
Prepaid expenses 11,219 9,352
Deferred income taxes 16,858 731
Net assets of discontinued operations - 366,045
Other 28,460 -
----------------------------------
Total current assets 489,538 631,000
Furniture, equipment and leasehold improvements, net 37,577 27,367
Goodwill, net 1,025,240 726,931
Other assets, net 19,526 17,328
----------------------------------
Total assets $ 1,571,881 $ 1,402,626
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 15,988 $ 16,366
Accounts payable and accrued expenses 206,681 92,433
Accrued payroll and related taxes 60,844 37,647
Income taxes payable 189,887 3,192
----------------------------------
Total current liabilities 473,400 149,638
Convertible debt - 86,250
Notes payable, long-term portion 15,525 347,785
Deferred income taxes 12,846 6,111
----------------------------------
Total liabilities 501,771 589,784
----------------------------------
Commitments and contingencies (Notes 3,4 and 6)
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, $.01 par value; 400,000,000 shares authorized
96,306,323 and 103,692,098 shares issued and outstanding on
December 31, 1998 and December 31, 1997, respectively 963 1,037
Additional contributed capital 564,248 634,194
Retained earnings 504,899 181,068
Deferred stock compensation - (3,457)
----------------------------------
Total stockholders' equity 1,070,110 812,842
----------------------------------
Total liabilities and stockholders' equity $ 1,571,881 $ 1,402,626
==================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Modis Professional Services Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
(dollar amounts in thousands except per share amounts) 1998 1997 1996
- - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 1,702,113 $ 1,164,124 $ 580,016
Cost of revenue 1,234,537 835,609 426,814
------------------------------------------
Gross Profit 467,576 328,515 153,202
------------------------------------------
Operating expenses:
General and administrative 264,551 189,271 97,209
Depreciation and amortization 37,105 22,456 10,303
Restructuring and impairment charges 34,759 - -
Merger related costs - - 14,446
------------------------------------------
Total operating expenses 336,415 211,727 121,958
------------------------------------------
Income from operations 131,161 116,788 31,244
------------------------------------------
Other income (expense):
Interest expense (25,065) (15,979) (6,825)
Interest income and other, net 11,090 1,364 3,851
-------------------------------------------
Other income (expense) (13,975) (14,615) (2,974)
Income from continuing operations before provision for income taxes 117,186 102,173 28,270
Provision for income taxes 48,326 38,803 19,693
------------------------------------------
Income from continuing operations 68,860 63,370 8,577
Discontinued operations (Note 16):
Income from discontinued operations (net of income
taxes of $17,522, $26,739 and $19,079, respectively) 30,020 38,663 22,633
Gain on sale of discontinued operations (net of income
taxes of $175,000) 230,561 - -
------------------------------------------
Income before extraordinary loss 329,441 102,033 31,210
Extraordinary loss on early extinguishment of debt
(net of income tax benefit of $3,512) (5,610) - -
------------------------------------------
Net income $ 323,831 $ 102,033 $ 31,210
==========================================
Basic income per common share from continuing operations $ 0.63 $ 0.62 $ 0.09
==========================================
Basic income per common share from discontinued operations $ 0.28 $ 0.38 $ 0.25
==========================================
Basic income per common share from gain on sale of
discontinued operations $ 2.12 $ - $ -
==========================================
Basic income per common share from extraordinary item $ (0.05) $ - $ -
==========================================
Basic net income per common share $ 2.98 $ 1.00 $ 0.34
==========================================
Average common shares outstanding, basic 108,518 101,914 90,582
==========================================
Diluted income per common share from continuing operations $ 0.61 $ 0.59 $ 0.09
==========================================
Diluted income per common share from discontinued operations $ 0.26 $ 0.34 $ 0.24
==========================================
Diluted income per common share from gain on sale of
discontinued operations $ 1.97 $ - $ -
==========================================
Diluted income per common share from extraordinary item $ (0.05) $ - $ -
==========================================
Diluted net income per common share $ 2.79 $ 0.93 $ 0.33
==========================================
Average common shares outstanding, diluted 116,882 113,109 95,317
==========================================
Unaudited pro forma data (Note 3):
Net income before provision for pro forma income taxes $ 31,210
Provision for pro forma income taxes (3,642)
--------------
Pro forma net income $ 34,852
==============
Pro forma basic income per common share from continuing
operations $ 0.13
==============
Pro forma basic income per common share from discontinued
operations $ 0.25
==============
Pro forma basic net income per common share from continuing operations $ 0.38
==============
Pro forma diluted income per common share from continuing
operations $ 0.13
==============
Pro forma diluted income per common share from discontinued
operations $ 0.24
==============
Pro forma diluted net income per common share $ 0.37
==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Modis Professional Services Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Common Additional Deferred
(dollar amounts in thousands Stock Stock Contributed Retained Stock
except per share amounts) Shares Amount Shares Amount Capital Earnings Compensation Total
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 - - 24,701,102 $ 247 $144,925 $ 49,992 $ (79) $ 195,085
3 for 1 stock split - - 49,402,203 494 (494) - - -
Sale of common stock - - 20,017,575 200 424,477 - - 424,677
Conversion of subordinated debentures - - 1,040,000 10 1,290 - - 1,300
Issuance of restricted stock - - 345,000 3 4,889 - (4,892) -
Exercise of stock options and related
tax benefit - - 2,726,412 27 17,013 - - 17,040
Vesting of restricted stock - - - - - - 537 537
Net income - - - - - 31,210 - 31,210
Issuance of stock related to business
combinations - - 994,521 11 2,086 1,214 - 3,311
Distribution to former shareholders of
acquired S-corporations - - - - - (3,381) - (3,381)
-----------------------------------------------------------------------------
Balance, December 31, 1996 - - 99,226,813 992 594,186 79,035 (4,434) 669,779
Conversion of subordinated debentures 727,272 7 993 1,000
Exercise of stock options and related
tax benefit - - 3,069,143 31 30,169 - - 30,200
Vesting of restricted stock - - - - - - 977 977
Net income - - - - - 102,033 - 102,033
Issuance of stock related to business
combinations - - 668,870 7 8,846 - - 8,853
-----------------------------------------------------------------------------
Balance, December 31, 1997 - - 103,692,098 1,037 634,194 181,068 (3,457) 812,842
Repurchase of Common Stock - - (21,750,522) (218) (309,517) - - (309,735)
Conversion of Convertible debt - - 6,149,339 61 71,238 - - 71,299
Exercise of stock options and related
tax benefit - - 2,741,895 28 27,453 - - 27,481
Vesting of restricted stock - - - - - - 3,457 3,457
Issuance of common stock related to
business combinations - - 5,473,513 55 140,880 - - 140,935
Net income - - - - - 323,831 - 323,831
-----------------------------------------------------------------------------
Balance, December 31, 1998 - - 96,306,323 $ 963 $564,248 $504,899 $ - $1,070,110
===========================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Modis Professional Services Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
(dollar amounts in thousands except for per share amounts) 1998 1997 1996
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 68,860 $ 63,370 $ 8,577
Adjustments to income from operations to net cash
provided by operating activities:
Restructuring and impairment charges 34,759 - -
Depreciation and amortization 37,105 22,456 10,303
Deferred income taxes (9,392) 3,800 1,221
Changes in assets and liabilities
Accounts receivable (55,712) (45,188) (34,761)
Prepaid expenses and other assets (9,072) 1,592 9,335
Accounts payable and accrued expenses 14,161 (8,151) 12,432
Accrued payroll and related taxes 10,007 3,701 (6,433)
Other, net (1,775) (2,623) 5,294
-----------------------------------------
Net cash provided by operating activities 88,941 38,957 5,968
-----------------------------------------
Cash flows from investing activities:
Proceeds from sale of net assets of discontinued
operations, net of costs 840,937 - -
Advances associated with sale of assets, net of
repayments (15,866) - -
Purchase of investments - - (10,438)
Investment in reverse repurchase agreements, net - - 48,449
Purchase of furniture, equipment and leasehold
improvements, net of disposals (22,873) (8,126) (7,345)
Purchase of businesses, including additional earnouts on
acquisitions, net of cash acquired (157,162) (357,776) (305,963)
-----------------------------------------
Net cash provided by (used in) investing activities 645,036 (365,902) (275,297)
-----------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering
expenses paid - - 424,677
Repurchases of common stock (309,735) - -
Repurchase of convertible debentures (23,581) - -
Proceeds from stock options exercised 24,235 23,130 6,977
Borrowings on indebtedness 302,500 446,583 92,800
Repayments on indebtedness (652,000) (133,853) (115,745)
Other, net - (100) (3,650)
-----------------------------------------
Net cash provided by (used in) provided by
financing activities (658,581) 335,760 405,059
Net increase in cash and cash equivalents -----------------------------------------
from continuing operations 75,396 8,815 135,730
Net cash provided by (used in) discontinued operations 6,482 (81,293) (77,038)
Cash and cash equivalents, beginning of year 23,938 96,416 37,724
-----------------------------------------
Cash and cash equivalents, end of year $ 105,816 $ 23,938 $ 96,416
=========================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
(dollar amounts in thousands except for per share amounts) 1998 1997 1996
- - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 26,528 $ 14,627 $ 8,049
Income taxes paid 40,440 24,323 8,308
COMPONENTS OF CASH USED IN DISCONTINUED OPERATIONS
Cash provided by (used in) operating activities 81,559 (2,413) 6,081
Cash used in investing activities (39,448) (94,323) (54,509)
Cash (used in) provided by financing activities (35,629) 15,443 (28,610)
-----------------------------------------
Net cash provided by (used in) discontinued operations 6,482 (81,293) (77,038)
=========================================
NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1996, the Company completed numerous acquisitions. In connection
with the acquisitions, liabilities were assumed as follows:
Fair value of assets acquired $ 383,008
Cash paid (306,958)
------------
Liabilities assumed $ 76,050
============
In fiscal 1996, Convertible Subordinated Debentures of $1,300 were converted by
the Company into 1,040,000 shares of common stock. Also, 345,000 shares of stock
were issued to the President and Chief Executive Officer pursuant to the terms
of a restricted stock grant.
During fiscal 1996, in connection with the acquisition of certain companies, the
Company issued 994,521 shares of common stock with a fair value of $3,311.
During fiscal 1997, the Company completed numerous acquisitions. In connection
with the acquisitions, liabilities were assumed as follows:
Fair value of assets acquired $ 393,474
Cash paid (280,148)
------------
Liabilities assumed $ 113,326
============
In fiscal 1997, Covertible Subordinated Debentures of $1,000 were converted by
the Company into 727,272 shares of common stock.
During fiscal 1997, in connection with the acquisition of certain companies, the
Company issued 668,870 shares of common stock with a fair value of $8,853.
During fiscal 1998, the Company completed numerous acquisitions. In connection
with the acquisitions, liabilities were assumed as follows:
Fair value of assets acquired $ 104,943
Cash paid (81,784)
------------
Liabilities assumed $ 23,159
============
In fiscal 1998, Convertible Subordinated Debentures of $69,800 were
converted by the Company into 6,149,339 shares of common stock. Also,
paid-in-capital was increased by $1,499 relating to unamortized debt issuance
costs associated with the conversion.
During fiscal 1998, in connection with the acquisition of certain companies, the
Company issued 5,473,513 shares of common stock with a fair value of $140,935.
</TABLE>
<PAGE>
Modis Professional Services Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS:
Modis Professional Services, Inc. (formerly known as AccuStaff
Incorporated), including all subsidiaries unless the context requires otherwise,
(Modis, or the Company), is an international provider of business services,
including consulting, training and outsourcing services to businesses,
professional and service organizations and governmental agencies through a
branch office network of approximately 264 offices throughout the United States,
Canada, United Kingdom and continental Europe. The Company's ongoing business is
organized into two divisions: the Information Technology division and the
Professional Services division, which generated 68.4% and 31.6% of the Company's
fiscal 1998 revenue from continuing operations, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany transactions have
been eliminated in the accompanying consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include deposits in banks, government securities,
money market funds, and short-term investments with maturities, when acquired,
of 90 days or less.
Furniture, Equipment, and Leasehold Improvements
Furniture, equipment, and leasehold improvements are recorded at cost less
accumulated depreciation and amortization. Depreciation of furniture and
equipment is computed using the straight-line method over the estimated useful
lives of the assets, ranging from 5 to 15 years. Amortization of leasehold
improvements is computed using the straight-line method over the useful life of
the asset or the term of the lease, whichever is shorter. Costs associated with
the development of the Company's proprietary software package have been deferred
and are being amortized over a five-year period. Total depreciation and
amortization expense was $10,973, $4,871 and $3,055 for 1998, 1997 and 1996,
respectively. Accumulated depreciation and amortization of furniture, equipment
and leasehold improvements as of December 31, 1998 and 1997 was $40,432 and
$29,459, respectively.
Goodwill
The Company has allocated the purchase price of acquired companies
according to the fair market value of the assets acquired. Goodwill represents
the excess of the cost over the fair value of the net tangible assets acquired
through these acquisitions, including any contingent consideration paid (as
discussed in Note 3 to the Consolidated Financial Statements), and is being
amortized on a straight-line basis over periods ranging from 15 to 40 years.
Management periodically reviews the potential impairment of goodwill on a
undiscounted cash flow basis to assess recoverability. If the estimated future
cash flows are projected to be less than the carrying amount, an impairment
write-down (representing the carrying amount of the goodwill that exceeds the
undiscounted expected future cash flows) would be recorded as a period expense.
Accumulated amortization was $51,846 and $25,714 as of December 31, 1998 and
1997, respectively. See Note 12 to the Consolidated Financial Statements for
discussion of goodwill impairment charge.
Revenue Recognition
The Company recognizes as revenue, at the time the professional services
are provided, the amounts billed to clients. In all such cases, the consultant
is the Company's employee and all costs of employing the worker are the
responsibility of the Company and are included in the cost of services.
Foreign Operations
The financial position and operating results of foreign operations are
consolidated using the local currency as the functional currency. Local currency
assets and liabilities are translated at the rate of exchange to the U.S. dollar
on the balance sheet date, and the local currency revenues and expenses are
translated at average rates of exchange to the U.S. dollar during the period.
Foreign currency translation gains and losses during fiscal 1998 and 1997 were
not material and have not been segregated in the Company's Statement of
Stockholders' Equity.
Stock Based Compensation
During 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which encourages all
companies to recognize compensation expense based on the fair value, at grant
date, of instruments issued pursuant to stock-based compensation plans. SFAS No.
123 requires the fair value of the instruments granted, which is measured
pursuant to the provisions of the statement, to be recognized as compensation
expense over the vesting period of the instrument. However, the statement also
allows companies to continue to measure compensation costs for these instruments
using the method of accounting prescribed by Accounting Principles Board Opinion
No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees." Companies
electing to account for stock-based compensation plans pursuant to the
provisions of APB No. 25 must make pro forma disclosures of net income as if the
fair value method defined in SFAS No. 123 had been applied. The Company has
elected to account for stock options under the provisions of APB No. 25 and has
included the disclosures required by SFAS No. 123 in Note 9 to the Consolidated
Financial Statements.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future
tax consequences of events that have been included in the financial statements
or tax returns in accordance with SFAS No. 109, Accounting for Income Taxes.
Under this method, deferred tax liabilities and assets are determined based on
the differences between the financial statement carrying amounts and the tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
Net Income Per Common Share
Basic and diluted net income per common share are presented in accordance
with SFAS No. 128, Earnings per Share. Basic net income per common share is
computed by dividing net income by the weighted average number of shares
outstanding. Diluted net income per common share includes the dilutive effect of
convertible debentures and stock options.
Comprehensive Income
During 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which requires that changes in comprehensive income be shown in a financial
statement that is displayed with the same prominence as other financial
statements. This statement is effective for the Company's 1998 fiscal year.
Management does not believe that the Company has material other comprehensive
income that would require separate disclosure.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Although management believes these estimates and assumptions are adequate,
actual results may differ from the estimates and assumptions used.
Reclassifications
Certain amounts have been reclassified in 1996 and 1997 to conform to the
1998 presentation.
Recent Accounting Pronouncements
During 1998, the American Institute of Certified Public Accountants'
Executive Committee issued Statement of Position Number 98-1 (SOP 98-1),
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use". SOP 98-1 is effective for fiscal years beginning after December 15, 1998.
Management believes that the Company is substantially in compliance with this
pronouncement and that the implementation of this pronouncement will not have a
material effect on the Company's consolidated financial position, results of
operations or cash flows. Implementation is planned for fiscal 1999.
During 1998, the American Institute of Certified Public Accountants'
Executive Committee issued Statement of Position Number 98-5 (SOP 98-5),
"Reporting on the Costs of Start-Up Activities". SOP 98-5 is effective for
fiscal years beginning after December 15, 1998. Management does not believe that
its adoption will have a material effect on the Company's consolidated financial
position or results of operations. Implementation is planned for fiscal 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and for Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999, and cannot be applied retroactively. We
have not yet quantified the impacts of adopting SFAS No. 133 on our financial
statements; however, SFAS No. 133 could increase the volatility of reported
earnings and other comprehensive income once adopted.
Unaudited Pro Forma Data
The McKinley Group, Inc. (McKinley) and HJM Consulting, Inc. (HJM), prior
to their acquisition by the Company, had elected to be treated as S Corporations
for federal and state income tax purposes. As such, the taxable income of each
company was reported to and subject to tax to its respective shareholders. The
unaudited pro forma data on the 1996 consolidated statement of income provides
approximate federal and state income taxes (by applying statutory income tax
rates) that would have been incurred if McKinley and HJM had been subject to tax
as a C Corporation.
3. ACQUISITIONS
For the year ended December 31, 1998
The Company acquired the following companies which have been accounted for
under the purchase method of accounting: Technology Services Corporation,
Millard Consulting Services, Inc., Diversified Consulting, Inc., Avalon, Ltd.,
Cope Management, Ltd. and Lion Recruitment, Ltd., Accountants Express of San
Diego, Inc., Software Knowledge, Ltd., Resource Control and Management, Ltd. and
Software Knowledge Systems, Ltd. and Colvin Resources, Inc. The aggregate
purchase price of these acquisitions during 1998, was $93,642, comprised of
$81,784 in cash and $11,858 in notes payable to former shareholders.
Additionally, in March 1998, the Company issued 4,598,698 shares of common stock
to the former shareholders of Actium, Inc. in exchange for all of their shares
of Actium, Inc., and in August 1998, the Company issued 874,815 shares of Common
Stock to the former shareholders of Consulting Partners, Inc. in exchange for
all of their shares of Consulting Partners, Inc. These two acquisitions were
also accounted for under the purchase method of accounting. The Company has
allocated the purchase price according to the fair market value of the assets
acquired in the aforementioned acquisitions accounted for under the purchase
method of accounting. The excess of the purchase price over the fair value of
the tangible assets (goodwill) is being amortized on a straight line basis over
a period of 40 years, including any contingent consideration paid.
For the year ended December 31, 1997
The Company acquired the following companies which have been accounted for
under the purchase method of accounting: Executives Monitor, Inc., Manchester,
Inc., Consultants in Computer Software, Inc., Preferred Consulting, Inc., Legal
Information Technology, Inc., Lenco Computer Consulting, Inc., Computer Action,
Inc., AMPL Inc. d/b/a Parker & Lynch, Wasser, Inc., AMICUS Staffing, Inc.,
Custom Software Services, Inc., Accounting Principals, Inc., Keystone Consulting
Group, Inc., Badenoch & Clark Ltd., Computer Systems Development Co. of America,
Inc., Technical Software Solutions, Inc., Real-Time Consulting, Inc., IT Link,
Inc., and Hunterskil Howard, plc. The aggregate purchase price of these
acquisitions during 1997, was $307,971, comprised of $280,148 in cash, $19,413
in notes payable to former shareholders and $8,410 in the Company's common
stock. The Company has allocated the purchase price according to the fair market
value of the assets acquired in the aforementioned acquisitions accounted for
under the purchase method of accounting. The excess of the purchase price over
the fair value of the tangible assets (goodwill) is being amortized on a
straight line basis over period of 40 years, including any contingent
consideration paid.
In addition, the Company merged with Schwab Carrese and Associates, Inc.
which was accounted for under the pooling-of-interests method of accounting. The
Company acquired all of the stock of Schwab Carrese and Associates, Inc. in
exchange for 263,550 shares of the Company's common stock. Due to the immaterial
affect on prior periods, the Company's historical financial statements have not
been restated for this merger.
For the year ended December 31, 1996
The Company acquired the following companies which have been accounted for
under the purchase method of accounting: Tekna, Inc., Goldfarb-Wasson
Associates, Inc. d/b/a/ GW Consulting, and an affiliated company, Programming
Enterprises, Inc. d/b/a Mini-Systems Associates, Zeitech, Inc., Career
Enhancement International, Inc., Additional Technical Support, Inc. and
affiliated companies, HNS Software, Inc., American Computer Professionals, Inc.,
Project Professionals, Inc., Logue & Rice, Inc. and affiliated companies,
Contact Recruiters, Inc. and an affiliated company, Openware Technologies, Inc.,
CAD Design, Inc., Alta Technical Services, Inc., In-House Counsel, Inc., TRAK
Services, Inc., Perspective Technology, Inc., Datacorp Business Systems, Inc.,
The Daedalian Group, Inc. d/b/a Berger & Co., North American Consulting
Services, Inc., TSG Professional Services, Inc., Contracted Services Group, Inc.
d/b/a The Blackstone Group, Scientific Staffing, Inc. and affiliated companies,
and Resource Solutions Group, Inc. The aggregate purchase price of these
acquisitions during 1996, was $336,958, comprised of $306,958 in cash, $28,000
in notes payable to former shareholders and $2,000 in the Company's common
stock. The Company has allocated the purchase price according to the fair market
value of the assets acquired in the aforementioned acquisitions accounted for
under the purchase method of accounting. The excess of the purchase price over
the fair value of the tangible assets (goodwill) is being amortized on a
straight line basis over periods ranging from 30 to 40 years, including any
contingent consideration paid for the purchase method acquisitions.
<PAGE>
The Company completed three mergers during 1996, McKinley, Career and HJM,
which were accounted for under the pooling-of-interests method of accounting and
for which the 1996 financial statements have been restated. Additionally, the
Company merged with Staffware, Inc. and Legal Support Personnel, Inc. which were
accounted for under the pooling-of-interests method of accounting. The Company
acquired all of the stock of the these two companies in exchange for 926,486
shares of the Company's common stock. Due to the immaterial effect on prior
periods, the Company's historical financial statements have not been restated
for these two acquisitions.
Earn-out payments
In addition, the Company is obligated under various acquisition agreements
to make earn-out payments to former stockholders of aforementioned acquired
companies accounted for under the purchase method of accounting, over periods up
to four years upon attainment of certain earnings targets of the acquired
companies. The Company anticipates that the cash generated by the operations of
the acquired companies will provide a substantial part of the capital required
to fund these payments.
Unaudited pro forma results of operations
The unaudited pro forma consolidated results of operations listed below
include the effects of the purchases discussed above assuming the acquisitions
had occurred at the beginning of the year in which each company was acquired and
also at the beginning of the preceding year. Pro forma adjustments have been
made to give effect to amortization of goodwill, interest expense on additional
borrowings used to fund the acquisitions, and other adjustments, together with
income tax effects.
The results for fiscal 1996, include $14,446, $10,818 net of taxes, in
acquisition costs related to the mergers with McKinley, Career, and HJM. The
results for fiscal 1998 include $25,202, net of taxes, in restructuring and
impairment charges. These pro forma amounts are not necessarily indicative of
what actually would have occurred if the acquisitions had been in effect for the
entire periods presented. In addition, they are not intended to be projections
of future results and do not reflect any synergies that might be achieved from
combined operations.
<TABLE>
<CAPTION>
Fiscal
-------------------------------------------
(unaudited) 1998 1997 1996
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue from continuing operations $ 1,829,318 $ 1,543,006 $ 1,127,786
Income from continuing operations 71,934 70,747 27,002
Income and gain on sale from discontinued operations 260,581 39,050 23,312
Net income $ 332,515 $ 109,797 $ 50,314
Diluted income per common share from continuing
operations $ 0.64 $ 0.66 $ 0.28
Diluted income per common share and gain on sale from
discontinued operations $ 2.23 $ 0.35 $ 0.24
Diluted net income per common share $ 2.87 $ 1.01 $ 0.52
</TABLE>
<PAGE>
4. NOTES PAYABLE
Notes payable at December 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
Fiscal
---------------------------
1998 1997
- - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Credit facilities $ - $ 337,000
Notes payable to former shareholders of acquired companies (interest
ranging from 4.99% to 8.00% due through November 2004) 31,513 27,151
---------------------------
31,513 364,151
Current portion of notes payable 15,988 16,366
---------------------------
Long-term portion of notes payable $ 15,525 $ 347,785
===========================
</TABLE>
Prior to the sale of the Company's Commercial operations and Teleservices
division, the Company had a $500 million credit facility which was syndicated to
a group of 20 banks with NationsBank, N.A. as the principal agent. This facility
was unsecured, but guaranteed by each of the Company's subsidiaries. Immediately
subsequent to the sale of the Company's Commercial and Teleservices divisions,
the existing facility was paid-off, and terminated. Repayment of the existing
facility totaled $477,000.
On October 30, 1998, the Company entered into a new $500 million revolving
credit facility which is syndicated to a group of 13 banks with NationsBank,
N.A. as the principal agent. The facility expires on October 21, 2003.
Outstanding amounts under the credit facility will bear interest at certain
floating rates as specified by the credit facility. The credit facility contains
certain financial and non-financial covenants relating to the Company's
operations, including maintaining certain financial ratios. Repayments of the
credit facility is guaranteed by the material subsidiaries of the Company. In
addition, approval is required by the majority of the lenders at such time that
the cash consideration of an individual acquisition exceeds 10% of consolidated
stockholders' equity of the Company. The Company incurred certain costs directly
related to securing the credit facility in the amount of approximately $788 .
These costs have been capitalized and are being amortized over the life of the
credit facility.
On October 16, 1995, Career Horizons, Inc., issued $86.25 million of 7%
Convertible Senior Notes Due 2002 which were assumed by the Company pursuant to
the merger with Career Horizons, Inc. Interest on the notes were paid
semiannually on May 1 and November 1 of each year. The Notes were convertible at
the option of the holder thereof, unless previously redeemed, into shares of
common stock of the Company at a conversion price of $11.35 per share. The Notes
were redeemable, in whole or in part, at the option of the Company, at any time
on or after November 1, 1998, at stated redemption prices, together with accrued
interest. The Company called the Notes on October 1, 1998, to be either redeemed
or converted as of November 1, 1998. Prior to November 1, 1998, $16.45 million
of Notes were redeemed by the Company at a premium of $7.13 million, and $69.8
million were converted into shares of common stock of the Company.
During the fourth quarter of fiscal 1998, the Company recognized an
extraordinary after-tax charge of $5.61 million as a result of the Company's
early retirement of $16.45 million of 7% Convertible Senior Notes Due 2002 and
the termination of the Company's existing credit facility immediately subsequent
to the sale of the Company's Commercial operations and Teleservices division.
The Company paid a premium of $7.13 million on the early extinguishment of
the 7% Senior Convertible Senior Notes and wrote off $0.37 million of related
unamortized debt issuance costs. Additionally, the Company wrote off $1.63
million of unamortized debt financing costs related to the termination of the
credit facility.
Maturities of notes payable are as follows for the fiscal years subsequent
to December 31, 1998:
<TABLE>
<CAPTION>
Fiscal year
- - - ------------------------------------
<S> <C>
1999 $ 15,988
2000 7,546
2001 -
2002 -
2003 2,475
Thereafter 5,504
--------
$ 31,513
========
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Components of accounts payable and accrued expenses as of December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
-------- ---------
<S> <C> <C>
Trade accounts payable 96,447 58,829
Accrued earn-out payments 65,161 33,604
Restructuring charge 24,823 -
Due to Randstad (1) 20,250 -
-------- --------
Total 206,681 92,433
======== ========
<FN>
(1) The Due to Randstad represents the purchase price true-up adjustment
pursuant to the sale agreement which was paid in the first quarter of fiscal
1999.
</FN>
</TABLE>
6. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases office space under various noncancelable operating leases.
The following is a schedule of future minimum lease payments with terms in
excess of one year:
<TABLE>
<CAPTION>
Fiscal Year
- - -------------------------------------------------------------------------------------------------------
<S> <C>
1999 $ 13,410
2000 11,828
2001 8,432
2002 6,083
2003 3,830
Thereafter 6,195
--------
$ 49,778
========
</TABLE>
Total rent expense for fiscal 1998, 1997 and 1996 was $13,834, $10,175, and
$4,303 respectively.
Litigation
The company is a party to a number of lawsuits and claims arising out of
the ordinary conduct of its business. In the opinion of management, based on the
advice of in-house and external legal counsel, the lawsuits and claims pending
are not likely to have a material adverse effect on the Company, its financial
position, or results of its operations.
<PAGE>
7. INCOME TAXES:
A comparative analysis of the provision for income taxes from continuing
operations is as follows:
<TABLE>
<CAPTION>
Fiscal
------------------------------------
1998 1997 1996
- - - --------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 42,030 $ 30,210 $ 15,594
State 5,789 3,347 2,878
Foreign 6,257 1,446 -
------------------------------------
54,076 35,003 18,472
------------------------------------
Deferred:
Federal: (8,256) 2,991 948
State: (1,136) 361 273
Foreign: 3,642 448 -
------------------------------------
(5,750) 3,800 1,221
------------------------------------
$ 48,326 $ 38,803 $ 19,693
====================================
</TABLE>
The difference between the actual income tax provision and the tax
provision computed by applying the statutory federal income tax rate to income
from continuing operations before provision for income taxes is attributable to
the following:
<TABLE>
<CAPTION>
Fiscal
--------------------------------------------------------------
1998 1997 1996
--------------------------------------------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax computed using the federal statutory rate $ 41,015 35.0% $ 35,761 35.0% $ 9,895 35.0%
State income taxes, net of federal income tax effect 3,024 2.6 2,699 2.6 1,305 4.6
Pre-acquisition earnings of acquired S corporations - - - - (1,081) (3.8)
Acquired subsidiaries change from cash to accrual basis - - - - 4,723 16.7
Non-deductible merger related costs - - - - 4,081 14.4
Non-deductible goodwill impairment charge 3,825 3.2 - - - -
Permanent differences and other 462 0.4 343 0.4 770 2.8
--------------------------------------------------------------
$ 48,326 41.2% $ 38,803 38.0% $ 19,693 69.7%
==============================================================
</TABLE>
<PAGE>
The components of the deferred tax assets and liabilities recorded in the
accompanying consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
Fiscal
---------------------------
1998 1997
- - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross deferred tax assets:
Self-insurance reserves $ 2,954 $ 376
Allowance for doubtful accounts receivable 4,097 897
Purchase accounting adjustments 2,887 2,910
Amortization of computer software costs - 135
Depreciation and amortization of furniture, equipment and leasehold improvements - 1,043
Restructuring and impairment charge 10,243 -
Other 2,207 1,872
---------------------------
Total gross deferred tax assets 22,388 7,233
---------------------------
Gross deferred tax liabilities:
Amortization of goodwill (15,399) (10,202)
Acquired subsidiaries change from cash to accrual basis (2,423) (2,411)
Depreciation and amortization of furniture, equipment and leasehold improvements (237) -
Other (317) -
---------------------------
Total gross deferred tax liabilities (18,376) (12,613)
---------------------------
Net deferred tax asset (liability) $ 4,012 $ (5,380)
===========================
</TABLE>
Management has determined, based on the history of prior taxable earnings and
its expectations for the future, taxable income will more likely than not be
sufficient to fully realize deferred tax assets and, accordingly, has not
reduced deferred tax assets by a valuation allowance.
8. EMPLOYEE BENEFIT PLANS
Profit Sharing Plans
The Company has a qualified contributory profit sharing plan (a 401(k)
plan) which covers all full-time employees over age twenty-one with over 90 days
of employment and 375 hours of service. The Company made contributions of
approximately $6,060, net of forfeitures, to the profit sharing plan for fiscal
1998. No matching contributions were made by the Company to the profit sharing
plan in fiscal 1997 or 1996. The Company also has a non-qualified deferred
compensation plan for its highly compensated employees. The non-qualified
deferred compensation plan does not provide for any matching, either
discretionay or formula-based, by the Company.
The Company has assumed many 401(k) plans of acquired subsidiaries. From
time to time, the Company merges these plans into the Company's plan. Effective
January 1, 1998, a significant number of the profit sharing plans were merged
and amended to become contributory plans. Pursuant to the terms of the various
profit sharing plans, the Company will match 50% of employee contributions up to
the first 5% of total eligible compensation, as defined. Company contributions
relating to these merged plans are included in the aforementioned total.
Prior to the Company's sale of its Commercial operations and Teleservices
division, as discussed in Note 16 to the Consolidated Financial Statements, the
Company had two 401(k) plans: the aforementioned plan covering professional and
IT employees, and one covering non-highly compensated (as defined by IRS
regulations) full time commercial employees over age twenty-one with at least
one year of employment and 1,000 hours of service (the 'commercial plan'). In
connection with the sale, the Company transferred sponsorship of the commercial
plan to Randstad U.S., L.P. The effective date of the transfer was September 27,
1998. Company contributions relating to the commercial plan prior to the
Company's sale of its commercial businesses are included in Income from
Discontinued Operations, as disclosed in Note 16 to the Consolidated Financial
Statements.
9. STOCKHOLDERS' EQUITY
Public Offerings of Common Stock
In April 1996, the Company completed an offering for the sale of 11,790,000
shares of common stock. The Company received $304,900 from the sale of the
shares, net of underwriting discount and expenses associated with the offering.
The net proceeds were used to repay all outstanding indebtedness under the
Company's credit facility, which was approximately $92,800. The remaining
proceeds have been used primarily to fund acquisitions.
The Company's subsidiary, Career Horizons, Inc., prior to the date of the
merger with the Company, completed offerings in which Career issued 8,227,575
shares of common stock, adjusted for the conversion to the Company's shares of
common stock, in which Career received $119,777, net of underwriting discounts
and expenses associated with the offerings. Career used a portion of the
proceeds from its initial offering to repay subordinated notes.
Stock Repurchase Plan
On October 31, 1998, the Company's Board of Directors authorized the
repurchase of up to $200.0 million of the Company's common stock pursuant to a
share buyback program. On December 4, 1998, the Company's Board of Directors
increased the authorized repurchase by an additional $110.0 million, bringing
the total authorized share buyback program amount to $310.0 million. As of
December 31, 1998, the Company had repurchased approximately 21,751,000 shares
under the share buyback program. Included in the shares repurchased as of
December 31, 1998 were approximately 6,150,000 shares repurchased under an
accelerated stock acquisition plan ("ASAP"). The Company entered into the ASAP
with a certain investment bank who agreed to sell the Company shares at a
certain cost. The investment bank borrowed these shares from its customers and
was required to enter into market transactions, subject to Company approval, and
purchase shares to return to its customers. The Company, pursuant to the
agreement, agreed to compensate the investment bank for any increases in the
Company's stock price that would cause the investment bank to pay an amount to
purchase the stock over the ASAP price. Conversely, the Company received a
refund in the purchase price if the Company's stock price fell below the ASAP
price. Subsequent to December 31, 1998, the Company used refunded proceeds from
the ASAP to complete the program during January and February 1999, with the
repurchase of approximately 597,000 shares, bringing the total shares
repurchased under the program to approximately 22,348,000 shares. All of these
shares were retired upon purchase.
Incentive Employee Stock Plans
Effective December 19, 1993, the Board of Directors approved the 1993 Stock
Option Plan (the 1993 Plan) which provides for the granting of options for the
purchase of up to an aggregate of 2,400,000 shares of common stock to key
employees.
Under the 1993 Plan, the Stock Option Committee (the Committee) of the Board
of Directors has the discretion to award stock options, stock appreciation
rights (SARS) or restricted stock options or non-qualified options and the
option price shall be established by the Committee. Incentive stock options may
be granted at an exercise price not less than 100% of the fair market value of a
share on the effective date of the grant and non-qualified options may be
granted at an exercise price not less than 50% of the fair market value of a
share on the effective date of the grant.
On August 24, 1995, the Board of Directors approved the 1995 Stock Option
Plan (the 1995 Plan) which provided for the granting of options up to an
aggregate of 3,000,000 shares of common stock to key employees under terms and
provisions similar to the 1993 Plan. During fiscal 1998, 1997 and 1996, the 1995
Plan was amended to provide for the granting of an additional 8,000,000,
3,000,000 and 6,000,000 shares, respectively. During fiscal 1998, the 1995 Plan
was amended to, among other things, eliminate the Company's ability to issue
SARS and to amend the definition of a director to comply with Rule 16b-3 of the
Securities Exchange Act of 1934, as amended and with Section 162(m) of the
Internal Revenue Code of 1986, as amended.
The Company assumed the stock option plans of its subsidiaries, Career
Horizons, Inc., Actium, Inc. and Consulting Partners, Inc., upon acquisition in
accordance with terms of the respective merger agreements. At the date of
respective acquisitions, the assumed plans had 2,566,252 options outstanding. As
of December 31, 1998 and 1997 the assumed plans had 340,719 and 372,445 options
outstanding, respectively.
Non-Employee Director Stock Plan
Effective December 29, 1993, the Board of Directors of the Company approved
a stock option plan (Director Plan) for non-employee directors, whereby 600,000
shares of common stock have been reserved for issuance to non-employee
directors. The Director Plan allows each non-employee director to purchase
60,000 shares at an exercise price equal to the fair market value at the date of
the grant upon election to the Board. In addition, each non-employee director is
granted 20,000 options upon the anniversary date of the director's initial
election date. The options become exercisable ratably over a five-year period
and expire ten years from the date of the grant. However, the options are
exercisable for a maximum of three years after the individual ceases to be a
director and if the director ceases to be a director within one year of
appointment the options are canceled. In fiscal 1997 and 1996, the Company
granted 120,000 and 80,000 options, respectively, at an average exercise price
of $28.35 and $25.31, respectively. During 1997, the Director plan was amended
to increase the number of shares available under the plan to 1.6 million shares.
In fiscal 1998, the Company granted 240,000 options at an average exercise price
of $21.56.
<PAGE>
The following table summarizes the Company's Stock Option Plans:
<TABLE>
<CAPTION>
Weighted
Range of Average
Shares Exercise Prices Exercise Price
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1995 6,064,456 $ 0.18 - $11.00 $ 3.88
Granted 6,594,535 $11.27 - $33.75 $ 19.50
Exercised (2,029,163) $ 0.18 - $12.09 $ 2.76
Canceled (61,467) $ 5.81 - $22.22 $ 11.69
----------------------------------------------
Balance, December 31, 1996 10,568,361 $ 0.69 - $33.75 $ 13.67
Granted 2,452,176 $16.13 - $31.38 $ 18.92
Exercised (3,069,143) $ 0.69 - $32.00 $ 7.02
Canceled (43,273) $11.80 - $24.92 $ 23.18
----------------------------------------------
Balance, December 31, 1997 9,908,121 $ 0.83 - $33.75 $ 16.76
Granted 8,560,721 $ 4.80 - $35.13 $ 16.00
Exercised (2,741,895) $ 0.83 - $28.50 $ 13.57
Canceled (4,522,954) $ 1.25 - $35.13 $ 20.22
----------------------------------------------
BALANCE, DECEMBER 31, 1998 11,203,993 $ 0.83 - $33.38 $ 15.38
==============================================
</TABLE>
Effective December 15, 1998, the Company's Board of Directors approved a
stock option repricing program whereby substantially all holders of outstanding
options who were active employees (except those officers and directors) with
exercise prices above $14.44 per share were amended so as to change the exercise
price to $14.44 per share, the fair market value on the effective date. A total
of 3,165,133 shares, with exercise prices ranging from $16.13 to $35.13, were
amended under this program. All other terms of such options remained unchanged.
The following table summarizes information about stock options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------- -----------------------------
Average Average
Average Exercise Exercise
Shares life (a) Price Shares Price
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.83 - $ 1.25 180,600 5.03 $ 1.22 168,600 $ 1.22
$ 2.54 - $ 2.54 84,078 8.50 2.54 84,078 2.54
$ 2.85 - $ 5.17 595,492 6.85 4.84 487,234 4.98
$ 6.63 - $ 9.00 36,633 8.85 7.85 32,433 7.76
$ 10.20 - $ 14.50 7,513,857 8.49 13.52 2,351,947 14.37
$ 16.38 - $ 24.00 1,328,333 8.80 21.16 55,336 19.62
$ 24.50 - $ 33.38 1,465,000 7.97 26.46 1,044,668 26.16
-------------------------------------------------------------------------
Total 11,203,993 8.31 $ 15.39 4,224,296 $ 15.49
=========================================================================
</TABLE>
(a) Average contractual life remaining in years.
At year-end 1997, options with an average exercise price of $15.16 were
exercisable on 5.1 million shares; at year-end 1996, options with an average
exercise price of $8.07 were exercisable on 5.0 million shares.
The Company adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, issued in October 1995. As permitted
by the provisions of SFAS No. 123, the Company applies APB Opinion 25 and
related interpretations in accounting for its employee stock option plans and,
accordingly, does not recognize compensation cost. If the Company had elected to
recognize compensation cost for options granted in 1998 and 1997, based on the
fair value of the options granted at the grant date as prescribed by SFAS No.
123, net income and earnings per share would have been reduced to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
1998 1997
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income
As reported $ 323,831 $ 102,033
Pro forma $ 312,029 $ 92,353
Basic net income per common share
As reported $ 2.98 $ 1.00
Pro forma $ 2.88 $ 0.91
Diluted net income per common share
As reported $ 2.79 $ 0.93
Pro forma $ 2.69 $ 0.85
</TABLE>
The weighted average fair values of options granted during 1998 and 1997 were
$5.20 and $6.16 per share, respectively. The fair value of each option grant is
estimated on the date of grant using the Black Scholes option-pricing model with
the following assumptions:
<TABLE>
<CAPTION>
Fiscal
1998 1997
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expected dividend yield - -
Expected stock price volatility .35 .30
Risk-free interest rate 5.57 6.12
Expected life of options (years) 3.50 3.40
</TABLE>
During Fiscal 1996, under the 1995 Plan, the Company's Board of Directors
issued a restricted stock grant of 345,000 shares to the Company's President and
Chief Executive Officer, which was scheduled to vest over a five year period.
The Company recorded $4,892 in deferred compensation expense which was amortized
on a straight line basis over the vesting period of the grant. In December 1998,
the Company's Board of Directors removed the vesting restrictions, thus vesting
the unamortized portion of the grant in the amount of $2,686.
Stock Splits
Effective March 6, 1996, the Company's Board of Directors approved a three-
for-one stock split of common stock for stockholders of record as of March 20,
1996. A total of $494 was transferred from additional contributed capital to the
stated value of common stock in connection with the stock split. The par value
of the common stock remains unchanged. All share and per share amounts have been
restated to retroactively reflect the stock split.
<PAGE>
10. NET INCOME PER COMMON SHARE
In accordance with SFAS No. 128, Earnings per Share, the calculation of
basic net income per common share and diluted net income per common share from
continuing and discontinued operations is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic net income per common share computation:
Net Income available to common shareholders from
continuing operations $ 68,860 $ 63,370 $ 8,577
------------------------------------------
Net Income available to common shareholders from
discontinued operations $ 30,020 $ 38,663 $ 22,633
------------------------------------------
Gain on sale of discontinued operations, net of income
taxes $ 230,561 $ - $ -
------------------------------------------
Extraordinary item of loss on early extinguishment of
debt, net of income benefit $ (5,610) $ - $ -
------------------------------------------
Basic average common shares outstanding 108,518 101,914 90,582
------------------------------------------
Basic income per common share from continuing
operations $ 0.63 $ 0.62 $ 0.09
==========================================
Basic income per common share from discontinued
operations $ 0.28 $ 0.38 $ 0.25
==========================================
Basic income per common share from gain on sale of
discontinued operations $ 2.12 $ - $ -
==========================================
Basic income per common share from extraordinary item $ (0.05) $ - $ -
==========================================
Basic net income per common share $ 2.98 $ 1.00 $ 0.34
==========================================
Diluted net income per common share computation:
Income available to common shareholders from continuing
operations $ 68,860 $ 63,370 $ 8,577
Interest paid on convertible debt, net of tax benefit (1) 2,784 3,712 -
Income available to common shareholders and assumed ------------------------------------------
conversions from continuing operations $ 71,644 $ 67,082 $ 8,577
Income available to common shareholders from ------------------------------------------
discontinued operations $ 30,020 $ 38,663 $ 22,633
------------------------------------------
Average common shares outstanding 108,518 101,914 90,582
Incremental shares from assumed conversions:
Convertible debt (1) 5,699 7,599 -
Stock options 2,665 3,596 4,735
------------------------------------------
Diluted average common shares outstanding 116,882 113,109 95,317
------------------------------------------
Diluted income per common share from continuing
operations $ 0.61 $ 0.59 $ 0.09
==========================================
Diluted income per common share from discontinued
operations $ 0.26 $ 0.34 $ 0.24
==========================================
Diluted income per common share from gain on sale of
discontinued operations $ 1.97 $ - $ -
==========================================
Diluted income per common share from extraordinary item $ (0.05) $ - $ -
==========================================
Diluted net income per common share $ 2.79 $ 0.93 $ 0.33
==========================================
(1) The Company's convertible debt did not have a dilutive effect on earnings per
share from continuing operations during fiscal 1996 and the Fourth quarter of
fiscal 1998.
</TABLE>
Options to purchase 2,201,757 shares of common stock that were outstanding
during 1998 were not included in the computation of diluted earnings per share
as the exercise prices of these options were greater than the average market
price of the common shares.
<PAGE>
11. CONCENTRATION OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The Company
places its cash with what it believes to be high credit quality institutions. At
times such investments may be in excess of the FDIC insurance limit. The Company
routinely assesses the financial strength of its customers and, as a
consequence, believes that its trade accounts receivable credit risk exposure is
limited.
In connection with the Company's sale of its health care operations, the
Company entered into an agreement with the purchaser of the health care assets
whereby the Company agreed to make advances to the company to fund its working
capital requirements. Any amounts extended are collateralized by the assets of
the related health care operations. As of December 31, 1998, the company had
advanced approximately $15.9 million under this agreement. Additionally, the
Company has $5.0 million in notes receivable from the purchasers of the health
care opertaions related to the initial sale.
12. RESTRUCTURING OF OPERATIONS AND IMPAIRMENT CHARGE
Restructuring and impairment charge. In December 1998, the Company's Board
of Directors approved the Restructuring Plan to strengthen overall profitability
of the Company by implementing a back office integration program and branch
repositioning plan in an effort to consolidate or close branches whose financial
performance does not meet the Company's expectations. Pursuant to the plan, the
Company recorded a restructuring and impairment charge of $34,759. The
restructuring component of the plan is based, in part, on the evaluation of
objective evidence of probable obligations to be incurred by the Company or of
specifically identified assets.
The Company, formerly AccuStaff Incorporated, was formed in 1992 and grew
over the next 6 1/2 years through both acquisitions and internal growth. Prior
to the disposition of the Commercial operations and the Teleservices and Health
Care divisions in 1998, the Company was largely organized and structured from an
administrative, operations and systems capabilities standpoint as a commercial
staffing business. The Restructuring Plan focuses on meeting the needs of an
information technology and professional services company and is designed to
result in a back office environment tailored to serve these businesses. Upon
completion of the Restructuring Plan, certain back office operations will be
centralized at the Company's headquarters and possibly one additional location,
and certain positions which were necessary under the previous organizational and
operational structure will be eliminated.
The Restructuring Plan calls for the consolidation or closing of 23
Professional Services division branches, certain organizational improvements and
the consolidation of 15 back office operations. This restructuring, which will
result in the elimination of approximately 290 positions, will be completed over
a 12- to 18-month period.
The major components of the restructuring and impairment charge include:(1)
costs to recognize severance and related benefits for the approximately 290
employees to be terminated of $7,494. The severance and related benefit accruals
are based on the Company's severance plan and other contractual termination
provisions. These accruals include amounts to be paid to employees upon
termination of employment. Prior to December 31, 1998, management had approved
and committed the Company to a plan that involved the involuntary termination of
certain employees. The benefit arrangements associated with this plan were
communicated to all employees in December 1998. The plan specifically identified
the number of employees to be terminated and their job classifications. (2)
costs to write down certain furniture, fixtures and computer equipment to net
realizable value at branches not performing up to the Company's expectations of
$2,476,(3) costs to write down goodwill associated with the acquisition of Legal
Information Technology, Inc. which was acquired in January, 1996, calculated in
accordance with SFAS 121 as described in Note 2 to the Consolidated Financial
Statements, Summary of Significant Accounting Policies - Goodwill of $9,936 (4)
costs to terminate leases and other exit and shutdown costs associated with the
consolidated or closed branches including closing the facilities of $8,035
million, and (5) costs to adjust accounts receivable due to the expected
increase in bad debts which results directly from the termination or change in
client relationships which results when branch and administrative employees, who
have the knowledge to effectively pursue collections are terminated of $6,818.
These costs were based upon management's best estimates based upon available
information.
Since payments pursuant to the Restructuring Plan will not commence until
fiscal 1999, there were no charges recognized by the Company against the
restructuring reserve as of December 31, 1998, at which time the total
restructuring reserve amount of $24,823 (which does not include the $9,936
goodwill impairment charge which was recorded against goodwill in the fouth
quarter of fiscal 1999) was included in accounts payable and accrued liabilities
Since payments pursuant to the Restructuring Plan will not commence until fiscal
1999.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and cash equivalents and
its debt obligations. Management believes that these financial instruments bear
interest at rates which approximate prevailing market rates for instruments with
similar characteristics and, accordingly, that the carrying values for these
instruments are reasonable estimates of fair value.
14. SEGMENT REPORTING
The Company has adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information, issued during 1997, which changes the way
public companies report information about segments. SFAS No. 131, which is based
on the management approach to segment reporting, includes requirements to report
selected segment information on a quarterly basis and to report certain
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues.
<PAGE>
The Company has two reportable segments: information technology (IT) and
professional services. The Company's reportable segments are strategic business
units that offer different services and are managed separately as each business
unit requires different resources and marketing strategies. The IT segment
provides computer related consulting services. The professional segment provides
personnel who perform specialized services such as accounting, legal, technical,
outplacement and scientific. See Note 16 to the Consolidated Financial
Statements for information on the discontinued operations of the Company as
these operations are not contained within the scope of this footnote.
Discontinued operations included the Company's former Commercial, Teleservices
and Health Care divisions.
The accounting policies of the segments are consistent with those described
in the summary of significant accounting policies in Note 2 to the Consolidated
Financial Statements, and all intersegment sales and transfers are eliminated.
The Company does not have a material reliance on any one customer
relationship as the Company is able to provide a breadth of services to numerous
Fortune 1000 and other leading businesses.
The Company evaluates segment performance based on revenues, gross margin
and pre-tax income from continuing operations. The Company does not allocate
income taxes or unusual items to the segments. The following table summarizes
segment and geographic information:
<TABLE>
<CAPTION>
Fiscal
------------------------------------------------
1998 1997 1996
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
IT $ 1,164,140 $ 780,634 $ 400,408
Professional 537,973 383,490 179,608
------------ ------------ ------------
Total Revenues $ 1,702,113 $ 1,164,124 $ 580,016
============ ============ ============
Gross Profit
IT $ 301,816 $ 209,170 $ 107,869
Professional 165,760 119,345 45,333
------------ ------------ ------------
Total Gross Profit $ 467,576 $ 328,515 $ 153,202
============ ============ ============
Income from Operations
IT $ 114,332 $ 79,339 $ 20,673
Professional 51,588 37,449 10,571
------------ ------------ ------------
165,920 116,788 31,244
Restucturing and impairment charges and
Other expenses 48,734 14,615 2,974
------------ ------------ ------------
Total pre-tax income from Continuing Operations $ 117,186 $ 102,173 $ 28,270
============ ============ ============
Assets
IT $ 1,037,722 $ 687,283
Professional 400,563 330,553
------------ ------------
1,438,285 1,017,836
Corporate 133,596 384,790
------------ ------------
Total Assets $ 1,571,881 $ 1,402,626
============ ============
Geographic Areas
Revenues
United States $ 1,348,120 $ 1,074,183 $ 580,016
U.K. 329,746 73,679 -
Other 24,247 16,262 -
------------ ------------ ------------
Total $ 1,702,113 $ 1,164,124 $ 580,016
============ ============ ============
Identifiable Assets
United States $ 1,222,821 $ 1,175,056
U.K. 345,182 222,095
Other 3,878 5,475
------------ ------------
Total $ 1,571,881 $ 1,402,626
============ ============
</TABLE>
<PAGE>
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Period Ended For the
---------------------------------------------------------- Year Ended
Mar. 31, June 30, Sept. 30, Dec. 31, Dec. 31,
1998 1998 1998 1998(1) 1998
- - ------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue $ 374,492 $ 425,383 $ 441,580 $ 460,658 $ 1,702,113
Gross profit 104,443 117,810 120,700 124,623 467,576
Income from continuing operations 22,097 24,124 22,021 618 68,860
Income from discontinued operations,
net of taxes 10,479 12,634 6,907 - 30,020
Gain on sale of discontinued
operations, net of taxes (1) - - 216,365 14,196 230,561
Extraordinary item of loss on early
extinguishment of debt, net of
benefit - - - (5,610) (5,610)
Net income 32,576 36,758 245,293 9,204 323,831
Basic income per common share from
continuing operations 0.21 0.22 0.20 0.01 0.63
Basic income per common share from
discontinued operations 0.10 0.11 0.06 - 0.28
Basic income per common share from
gain on sale of discontinued
operations - - 1.94 0.13 2.12
Basic income per common share from
extraordinary item - - - (0.05) (0.05)
Basic net income per common share 0.31 0.33 2.20 0.09 2.98
Diluted income per common share from
continuing operations 0.20 0.21 0.19 0.01 0.61
Diluted income per common share from
discontinued operations 0.09 0.10 0.06 - 0.26
Diluted income per common share from
gain on sale of discontinued
operations - - 1.79 0.13 1.97
Diluted income per common share from
extraordinary item - - - (0.05) (0.05)
Diluted net income per common share $ 0.29 $ 0.31 $ 2.04 $ 0.09 $ 2.79
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Period Ended For the
---------------------------------------------------------- Year Ended
Mar. 31, June 30, Sept. 30, Dec. 31, Dec. 31,
1997 1997 1997 1997 1997
- - ------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue $ 242,234 $ 273,675 $ 302,271 $ 345,944 $ 1,164,124
Gross profit 65,413 75,888 87,991 99,223 328,515
Income from continuing operations 14,750 12,886 16,549 19,185 63,370
Income from discontinued operations,
net of taxes 6,711 11,001 12,142 8,809 38,663
Net income 21,461 23,887 28,691 27,994 102,033
Basic income per common share from
continuing operations 0.14 0.13 0.16 0.19 0.62
Basic income per common share from
discontinued operations 0.07 0.11 0.12 0.08 0.38
Basic net income per common share 0.21 0.24 0.28 0.27 1.00
Diluted income per common share from
continuing operations 0.14 0.12 0.15 0.18 0.59
Diluted income per common share from
discontinued operations 0.06 0.10 0.11 0.07 0.34
Diluted net income per common share $ 0.20 $ 0.22 $ 0.26 $ 0.25 $ 0.93
</TABLE>
(1) In the fourth quarter of 1998, the Company recorded a restructuring and
impairment charge of $34,759. See Note 12 to the Consolidated Financial
Statements for further discussion on the restructuring and impairment charge.
(2) During the fourth quarter of 1998, the Company recorded adjustments to
estimated costs relating to the third quarter gain on sale of net assets of
discontinued operations to reflect the final determination of transaction
related costs and income taxes.
<PAGE>
16. DISCONTINUED OPERATIONS
Effective September 27, 1998 and March 30, 1998, the Company sold its
Commercial operations and Teleservices division, and the operations and certain
assets of its Health Care division, respectively, (jointly the "Commercial
Businesses"). As a result, the Commercial Businesses have been reported as a
discontinued operation, and the consolidated financial statements have been
reclassified to segregate the net assets and operating results of the Commercial
Businesses. The Commercial operations and Teleservices division were sold with a
final adjusted purchase price of $826.2 million in cash to Randstad U.S., L.P.
('Randstad'), the U.S. operating company of Ranstad Holding nv, an
international staffing company based in The Netherlands. The after-tax gain on
the sale was $230.6 million. The operations and certain assets of the Health
Care division were sold for consideration of $8.0 million, consisting of $3.0
million in cash and $5.0 million in a note receivable due March 30, 2000 bearing
interest at 2% in excess of the prime rate. The after-tax gain on the sale was
$0.1 million
In connection with the Company's sale of its health care operations, the
Company entered into an agreement with the purchaser of the health care assets
whereby the Company agreed to extend capital to the purchaser to fund its
working capital requirements. Any amounts extended are collateralized by the
accounts receivable and certain other assets of the related health care
operations. Any advances made under this agreement accrue interest at 10% per
year. As of December 31, 1998, the Company had extended approximately $15.9
million under this agreement.
The sale of the Commercial Businesses represents the disposal of a segment
of the Company's business. Accordingly, the financial statements for the years
ended December 31, 1998, 1997 and 1996 have been reclassified to separate the
revenues, costs and expenses, assets and liabilities, and cash flows of the
Commercial Businesses sold. The net operating results of the Commercial
Businesses have been reported, net of applicable income taxes, as 'Income from
Discontinued Operations'. The net assets of the Commercial Businesses have been
reported as 'Net Assets of Discontinued Operations'; and the net cash flows of
the Commercial Businesses have been reported as 'Net Cash Used In Discontinued
Operations'.
Summarized financial information for the discontinued operations follows:
<TABLE>
<CAPTION>
For the years ended
December 31 1998 1997 1996
(dollars in thousands)
<CAPTION>
<S> <C> <C> <C>
Revenue $ 919,400 $ 1,260,702 $ 1,031,431
Cost of Revenue 708,930 975,489 807,940
Operating Expense 156,180 215,437 181,350
Operating Income 54,290 69,776 42,141
Interest, net 4,200 4,374 429
Provision for income taxes 20,070 26,739 19,079
Income from discontinued operations 30,020 38,663 22,633
</TABLE>
<PAGE>
Results of the discontinued Commercial Business include the allocation of
certain net common expenses for corporate support and back office functions
totaling approximately $0.9 million, $1.2 million, and $1.5 million for the
years ended December 31, 1998, 1997 and 1996, respectively. Corporate support
and back office allocations are based on the ratio of the Company's consolidated
revenues, operating income and assets to that of the discontinued Commercial
Business. Additionally, the results of discontinued operations include
allocations of consolidated interest expense totaling $4.2 million, $4.4 million
and $0.4 million for fiscal 1998,1997 and 1996, respectively. Interest expense
is allocated based on the historic funding needs of the discontinued operations,
using a rate that approximates the weighted average interest rate outstanding
for the Company for each fiscal year presented. Historic funding needs include:
the purchases of property, plant and equipment, acquisitions, current income tax
liabilities and fluctuating working capital needs. The net assets of the
Company's discontinued operations are as follows:
<TABLE>
<CAPTION>
December 31,
(dollars in thousands) 1997
<S> <C>
Receivables $ 195,415
Other current assets 60,674
Total current assets 256,089
Furniture, Equipment and Leasehold Improvements, net 21,210
Goodwill, net 189,659
Other Assets 9,581
Total Assets 476,539
Current Liabilities 79,623
Non-current liabilities 30,871
Total liabilities 110,494
----------------
Total Net assets of discontinued operations $ 366,045
================
</TABLE>
PART III
Information required by Part III is incorporated by reference to the
Registrant's Definitive Proxy Statement to be filed pursuant to Regulation 14A
("the Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
section entitled "Election of Directors" and "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" contained in the proxy statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
section entitled "Executive Compensation" contained in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
section entitled "Voting Securities" contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
sections entitled 'Certain Relationships and Related Transactions'; and
'Compensation Committee Interlocks and Insider Participation' contained in the
Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
1. Financial Statements
The following consolidated financial statements of the Company and its
subsidiaries are included in Item 8 of this report:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for each of the three years in the period
ended December 31, 1998
<PAGE>
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1998
Consolidated Statements of Stockholders' Equity for each of the three years in
the period ended December 31, 1998
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Financial statement schedules required to be included in this
report are either shown in the financial statements and notes thereto
included in Item 8 of this report or have been omitted because they
are not applicable.
3. Exhibits
3.1 Amended and restated Articles of Incorporation.(1)
3.2 Amended and Restated Bylaws.
10.1 AccuStaff Incorporated Employee Stock Plan. (2)
10.2 AccuStaff Incorporated amended and restated Non-Employee
Director Stock Plan.
10.3 Form of Employee Stock Option Award Agreement. (2)
10.4 Form of Non-Employee Director Stock Option Award Agreement,
as amended.
10.5 Profit Sharing Plan. (2)
10.6 Revolving Credit and Reimbursement Agreement by and between
the Company and NationsBank National Association as
Administration Agent and certain lenders named therein,
dated October 30, 1998.
10.7 Employment Agreement with Derek E. Dewan, as amended. (3)
10.8 Modis Professional Services, Inc., 1995 Stock Option Plan, as
amended.
10.9 Form of Stock Option Agreement under Modis Professional
Services, Inc.amended and restated 1995 Stock Option Plan. (5)
10.10 Executive Employment Agreement with Michael D. Abney. (1)
10.11 Executive Employment Agreement with Marc M. Mayo.
<PAGE>
10.12 Form of Director's and Officer's Indemnification Agreement.(2)
10.13 Executive Employment Agreement with Timothy D. Payne
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Definitive Proxy Statement
on Schedule 14A filed July 14, 1998.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-79806).
(3) Employment Agreement, First, Second and Third Amendments incorporated
by reference to the Company's Registration Statement on Form S-1, filed
August 29, 1996(Reg. No. 33-96372). Fourth Amendment incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996.
(4) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ended September 30, 1996.
(5) Incorporated by reference to the Company's Registration on Form S-8
(No. 333-49495).
(b) Reports on Form 8-K. The Registrant filed the following reports on Form
8-K during the fourth quarter of 1998:
(i) Form 8-K dated October 1, 1998 as amended by Forms 8-K/A dated
October 16, 1998, and November 13, 1998, reporting the following:
1. The completion of the sale of its commercial staffing
business to Randstad U.S., L.P. filed pursuant to Item 2.
2. The change of the Company's name from AccuStaff Incorporated
to Modis Professional Services, Inc., and the change of the
Company's trading symbol on the New York Stock Exchange from
'ASI' to 'MPS' filed pursuant to Item 5.
<PAGE>
3. The Company's Notice of Redemption to the holders of the
Company's 7% Convertible Senior Notes due 2002 filed pursuant
to Item 5. Included in such Form 8-K, as amended, were: (a)
unaudited pro forma condensed consolidated balance sheet as
of June 30, 1998; (b) unaudited pro forma condensed
consolidated statement of income for the year ended December
31, 1997; (c) unaudited pro forma condensed consolidated
statement of income for the six months ended June 30, 1998;
and (d) notes to unaudited pro forma condensed consolidated
financial statements.
(ii) Form 8-K dated November 13, 1998, reporting the closing of the
sale of the operations and certain assets of its Commercial
Businesses to Randstad U.S., L.P. filed pursuant to Item 5 of Form
8-K. Included in such Form 8-K were: (a) audited consolidated
financial statements; (b) management's discussion and analysis of
results of operations for the three years in the period ended
December 31, 1997 and as of December 31, 1997 and 1996; and (c)
selected financial highlights.
(c) The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedule - not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MODIS PROFESSIONAL SERVICES, INC.
By: /s/ Derek E. Dewan
--------------------------
Derek E. Dewan
President, Chairman of
the Board and Chief Executive
Officer
Date: March 30, 1999
Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/ DEREK E. DEWAN President, Chairman March 30, 1999
- - ---------------------- of the Board and Chief
Derek E. Dewan Executive Officer
/s/ MICHAEL D. ABNEY Senior Vice President, March 30, 1999
- - ---------------------- Chief Financial Officer,
Michael D. Abney Treasurer, and Director
/s/ ROBERT P. CROUCH Vice President and March 30, 1999
- - ---------------------- Chief Accounting Officer
Robert P. Crouch
/s/ JOHN K. ANDERSON, JR. Director March 30, 1999
- - ----------------------
John K. Anderson
/s/ T. WAYNE DAVIS Director March 30, 1999
- - ----------------------
T. Wayne Davis
/s/ DANIEL M. DOYLE Director March 30, 1999
- - ----------------------
Daniel M. Doyle
/s/ PETER J. TANOUS Director March 30, 1999
- - ----------------------
Peter J. Tanous
<PAGE>
EXHIBIT INDEX
3.2 Amended and restated bylaws
10.2 AccuStaff Incorporated amended and restated non-employee director stock
option plan
10.6 Revolving Credit and Reimbursement Agreement
10.7 Fifth amendment to employment agreement of Derek E. Dewan
10.8 Modis Professional Services, Inc., 1995 Stock Option Plan, as
amended.
10.11 Executive employment agreement of Marc M. Mayo
10.13 Executive employment agreement of Timothy D. Payne
23 Consents of Experts and Counsel
27 Financial Data Schedule
<PAGE>
BYLAWS
OF
ACCUSTAFF INCORPORATED*
(a Florida corporation)
as amended 6-30-98
* now known as Modis Professional Services, Inc.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
ARTICLE 1Definitions..............................................................................................1
Section 1.1 Definitions........................................................................1
ARTICLE 2Offices..................................................................................................1
Section 2.1 Principal and Business Offices.....................................................1
Section 2.2 Registered Office..................................................................1
ARTICLE 3Shareholders.............................................................................................2
Section 3.1 Annual Meeting.....................................................................2
Section 3.2 Special Meetings...................................................................2
Section 3.3 Place of Meeting...................................................................2
Section 3.4 Notice of Meeting..................................................................2
Section 3.5 Waiver of Notice...................................................................3
Section 3.6 Fixing of Record Date..............................................................3
Section 3.7 Shareholders' List for Meetings....................................................4
Section 3.8 Quorum.............................................................................5
Section 3.9 Voting of Shares...................................................................5
Section 3.10 Vote Required.....................................................................5
Section 3.11 Conduct of Meeting................................................................6
Section 3.12 Inspection of Election............................................................6
Section 3.13 Proxies...........................................................................6
Section 3.14 Shareholder Nominations and Proposals.............................................7
Section 3.15 Action by Shareholders Without Meeting............................................7
Section 3.16 Acceptance of Instruments Showing Shareholder Action..............................8
ARTICLE 4Board of Directors.......................................................................................8
Section 4.1 General Powers and Number..........................................................8
Section 4.2 Qualifications.....................................................................9
Section 4.3 Term of Office.....................................................................9
Section 4.4 Removal............................................................................9
Section 4.5 Resignation........................................................................9
Section 4.6 Vacancies..........................................................................9
Section 4.7 Compensation.......................................................................9
Section 4.8 Regular Meetings..................................................................10
Section 4.9 Special Meetings..................................................................10
Section 4.10 Notice...........................................................................10
Section 4.11 Waiver of Notice.................................................................10
Section 4.12 Quorum and Voting................................................................10
Section 4.13 Conduct of Meetings..............................................................10
Section 4.14 Committees.......................................................................11
Section 4.15 Action Without Meeting...........................................................12
ARTICLE 5Officers................................................................................................12
Section 5.1 Number............................................................................12
Section 5.2 Election and Term of Office.......................................................12
Section 5.3 Removal...........................................................................12
Section 5.4 Resignation.......................................................................12
Section 5.5 Vacancies.........................................................................12
Section 5.6 President.........................................................................13
Section 5.7 Chief Operating Officer...........................................................13
Section 5.8 Vice Presidents...................................................................13
Section 5.9 Secretary.........................................................................13
Section 5.10 Treasurer........................................................................14
Section 5.11 Assistant Secretaries and Assistant Treasurers....................................14
Section 5.12 Other Assistants and Acting Officers.............................................14
Section 5.13 Salaries.........................................................................14
ARTICLE 6Contracts, Checks and Deposits; Special Corporate Acts..................................................15
Section 6.1 Contracts.........................................................................15
Section 6.2 Checks, Drafts, etc...............................................................15
Section 6.3 Deposits..........................................................................15
Section 6.4 Voting of Securities Owned by Corporation.........................................15
ARTICLE 7Certificates for Shares; Transfer of Shares.............................................................16
Section 7.1 Consideration for Shares..........................................................16
Section 7.2 Certificates for Shares...........................................................16
Section 7.3 Transfer of Shares................................................................16
Section 7.4 Restrictions on Transfer..........................................................17
Section 7.5 Lost, Destroyed, or Stolen Certificates...........................................17
Section 7.6 Stock Regulations.................................................................17
ARTICLE 8Seal....................................................................................................17
Section 8.1 Seal..............................................................................17
ARTICLE 9Books and Records.......................................................................................17
Section 9.1 Books and Records..................................................................17
Section 9.2 Shareholders' Inspection Rights...................................................18
Section 9.3 Distribution of Financial Information.............................................18
Section 9.4 Other Reports.....................................................................18
ARTICLE 10Indemnification........................................................................................18
Section 10.1 Provision of Indemnification......................................................18
ARTICLE 11Amendments.............................................................................................19
Section 11.1 Power to Amend....................................................................19
</TABLE>
<PAGE>
ARTICLE 1
Definitions
Section 1.1 .....Definitions. The following terms shall have the following
meanings for purposes of these bylaws:
'Act' means the Florida Business Corporation Act, as it may be amended from
time to time, or any successor legislation thereto.
'Deliver' or 'delivery' includes delivery by hand; United States mail;
facsimile, telegraph, teletype or other form of electronic transmission; and
private mail carriers handling nationwide mail services.
'Distribution' means a direct or indirect transfer of money or other
property (except shares in the corporation) or an incurrence of indebtedness by
the corporation to or for the benefit of shareholders in respect of any of the
corporation's shares. A distribution may be in the form of a declaration or
payment of a dividend; a purchase, redemption, or other acquisition of shares; a
distribution of indebtedness; or otherwise.
'Principal office' means the office (within or without the State of
Florida) where the corporation's principal executive offices are located, as
designated in the Articles of Incorporation until an annual report has been
filed with the Florida Department of State, and thereafter as designated in the
annual report.
ARTICLE 2
Offices
Section 1.2 .....Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Florida, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
Section 1.3 .....Registered Office. The registered office of the corporation
required by the Act to be maintained in the State of Florida may but need not be
identical with the principal office if located in the State of Florida, and the
address of the registered office may be changed from time to time by the Board
of Directors or by the registered agent. The business office of the registered
agent of the corporation shall be identical to such registered office.
<PAGE>
ARTICLE 3
Shareholders
Section 1.4 .....Annual Meeting. The annual meeting of shareholders shall be
held within four months after the close of each fiscal year of the corporation
on a date and at a time and place designated by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held on
the day fixed as herein provided for any annual meeting of shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of shareholders as soon thereafter as is practicable.
Section 1.5 .....Special Meetings.
(1) Call by Directors or President. Special meetings of shareholders, for any
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board (if any) or the President.
(2) Call by Shareholders. The corporation shall call a special meeting of
shareholders in the event that the holders of at least forty (40%) percent of
all of the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date, and deliver to the Secretary one or
more written demands for the meeting describing one or more purposes for which
it is to be held. The corporation shall give notice of such a special meeting
within sixty days after the date that the demand is delivered to the
corporation.
Section 1.6 .....Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of shareholders. If no designation is made,
the place of meeting shall be the principal office of the corporation.
Section 1.7 .....Notice of Meeting.
(1) Content and Delivery. Written notice stating the date, time, and place of
any meeting of shareholders and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten days nor more than sixty days before the date of the meeting by or at the
direction of the President or the Secretary, or the officer or persons duly
calling the meeting, to each shareholder of record entitled to vote at such
meeting and to such other persons as required by the Act. Unless the Act
requires otherwise, notice of an annual meeting need not include a description
of the purpose or purposes for which the meeting is called. If mailed, notice of
a meeting of shareholders shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the corporation, with postage thereon
prepaid.
<PAGE>
2) Notice of Adjourned Meetings. If an annual or special meeting of shareholders
is adjourned to a different date, time, or place, the corporation shall not be
required to give notice of the new date, time, or place if the new date, time,
or place is announced at the meeting before adjournment; provided, however, that
if a new record date for an adjourned meeting is or must be fixed, the
corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new record date who are entitled to notice of the
meeting.
(3) No Notice Under Certain Circumstances. Notwithstanding the other provisions
of this Section, no notice of a meeting of shareholders need be given to a
shareholder if: (1) an annual report and proxy statement for two consecutive
annual meetings of shareholders, or (2) all, and at least two, checks in payment
of dividends or interest on securities during a twelve month period have been
sent by first-class, United States mail, addressed to the shareholder at his or
her address as it appears on the share transfer books of the corporation, and
returned undeliverable. The obligation of the corporation to give notice of a
shareholders' meeting to any such shareholder shall be reinstated once the
corporation has received a new address for such shareholder for entry on its
share transfer books.
Section 1.8 .....Waiver of Notice.
(1) Written Waiver. A shareholder may waive any notice required by the Act or
these bylaws before or after the date and time stated for the meeting in the
notice. The waiver shall be in writing and signed by the shareholder entitled to
the notice, and be delivered to the corporation for inclusion in the minutes or
filing with the corporate records. Neither the business to be transacted at nor
the purpose of any regular or special meeting of shareholders need be specified
in any written waiver of notice.
(2) Waiver by Attendance. A shareholder's attendance at a meeting, in person or
by proxy, waives objection to all of the following: (1) lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting;
and (2) consideration of a particular matter at the meeting that is not within
the purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
Section 1.9 .....Fixing of Record Date.
(1) General. The Board of Directors may fix in advance a date as the record date
for the purpose of determining shareholders entitled to notice of a
shareholders' meeting, entitled to vote, or take any other action. In no event
may a record date fixed by the Board of Directors be a date preceding the date
upon which the resolution fixing the record date is adopted or a date more than
seventy days before the date of meeting or action requiring a determination of
shareholders.
(2) Special Meeting. The record date for determining shareholders entitled to
demand a special meeting shall be the close of business on the date the first
shareholder delivers his or her demand to the corporation.
<PAGE>
3) Shareholder Action by Written Consent. If no prior action is required by the
Board of Directors pursuant to the Act, the record date for determining
shareholders entitled to take action without a meeting shall be the close of
business on the date the first signed written consent with respect to the action
in question is delivered to the corporation. If prior action is required by the
Board of Directors pursuant to the Act, such record date shall be the close of
business on the date on which the Board of Directors adopts the resolution
taking such prior action unless the Board of Directors otherwise fixes a record
date.
(4) Absence of Board Determination for Shareholders' Meeting. If the Board of
Directors does not determine the record date for determining shareholders
entitled to notice of and to vote at an annual or special shareholders' meeting,
such record date shall be the close of business on the date before the first
notice with respect thereto is delivered to shareholders.
(5) Adjourned Meeting. A record date for determining shareholders entitled to
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the Board of Directors fixes a new record date, which it
must do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting.
(6) Certain Distributions. If the Board of Directors does not determine the
record date for determining shareholders entitled to a distribution (other than
one involving a purchase, redemption, or other acquisition of the corporation's
shares or a share dividend), such record date shall be the close of business on
the date on which the Board of Directors authorizes the distribution.
Section 1.10 ....Shareholders' List for Meetings.
(1) Preparation and Availability. After a record date for a meeting of
shareholders has been fixed, the corporation shall prepare an alphabetical list
of the names of all of the shareholders entitled to notice of the meeting. The
list shall be arranged by class or series of shares, if any, and show the
address of and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder for a period of ten days prior to
the meeting or such shorter time as exists between the record date and the
meeting date, and continuing through the meeting, at the corporation's principal
office, at a place identified in the meeting notice in the city where the
meeting will be held, or at the office of the corporation's transfer agent or
registrar, if any. A shareholder or his or her agent may, on written demand,
inspect the list, subject to the requirements of the Act, during regular
business hours and at his or her expense, during the period that is available
for inspection pursuant to this Section. The corporation shall make the
shareholders' list available at the meeting and any shareholder or his or her
agent or attorney may inspect the list at any time during the meeting or any
adjournment thereof.
(2) Prima Facie Evidence. The shareholders' list is prima facie evidence of the
identity of shareholders entitled to examine the shareholders' list or to vote
at a meeting of shareholders.
<PAGE>
3) Failure to Comply. If the requirements of this Section have not been
substantially complied with, or if the corporation refuses to allow a
shareholder or his or her agent or attorney to inspect the shareholders' list
before or at the meeting, on the demand of any shareholder, in person or by
proxy, who failed to get such access, the meeting shall be adjourned until such
requirements are complied with.
(4) Validity of Action Not Affected. Refusal or failure to prepare or make
available the shareholders' list shall not affect the validity of any action
taken at a meeting of shareholders.
Section 1.11 ....Quorum.
(1) What Constitutes a Quorum. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. If the corporation has only one class of
stock outstanding, such class shall constitute a separate voting group for
purposes of this Section. Except as otherwise provided in the Act, a majority of
the votes entitled to be cast on the matter shall constitute a quorum of the
voting group for action on that matter.
(2) Presence of Shares. Once a share is represented for any purpose at a
meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes of
determining whether a quorum exists for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting.
(3) Adjournment in Absence of Quorum. Where a quorum is not present, the holders
of a majority of the shares represented and who would be entitled to vote at the
meeting if a quorum were present may adjourn such meeting from time to time.
Section 1.12 ....Voting of Shares. Except as provided in the Articles of
Incorporation or the Act, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a meeting of shareholders.
Section 1.13 ....Vote Required.
(1) Matters Other Than Election of Directors. If a quorum exists, except in the
case of the election of directors, action on a matter shall be approved if the
votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Act requires a greater number of affirmative
votes.
(2) Election of Directors. Each director shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election of directors at a
meeting at which as quorum is present. Each shareholder who is entitled to vote
at an election of directors has the right to vote the number of shares owned by
him or her for as many persons as there are directors to be elected.
Shareholders do not have a right to cumulate their votes for directors.
Section 1.14 ....Conduct of Meeting. The Chairman of the Board of Directors, and
if there be none, or in his or her absence, the President, and in his or her
absence, a Vice President in the order provided under the Section of these
bylaws entitled 'Vice Presidents', and in their absence, any person chosen by
the shareholders present shall call a shareholders' meeting to order and shall
act as presiding officer of the meeting, and the Secretary of the corporation
shall act as secretary of all meetings of the shareholders, but, in the absence
of the Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting. The presiding officer of the meeting shall have broad
discretion in determining the order of business at a shareholders' meeting. The
presiding officer's authority to conduct the meeting shall include, but in no
way be limited to, recognizing shareholders entitled to speak, calling for the
necessary reports, stating questions and putting them to a vote, calling for
nominations, and announcing the results of voting. The presiding officer also
shall take such actions as are necessary and appropriate to preserve order at
the meeting. The rules of parliamentary procedure need not be observed in the
conduct of shareholders' meetings; however, meetings shall be conducted in
accordance with accepted usage and common practice with fair treatment to all
who are entitled to take part.
Section 1.15 ....Inspection of Election. Inspectors of election may be appointed
by the Board of Directors to act at any meeting of shareholders at which any
vote is taken. If inspectors of election are not so appointed, the presiding
officer of the meeting may, and on the request of any shareholder shall, make
such appointment. The inspectors of election shall determine the number of
shares outstanding, the voting rights with respect to each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies; receive votes, ballots, consents, and waivers;
hear and determine all challenges and questions arising in connection with the
vote; count and tabulate all votes, consents, and waivers; determine and
announce the result; and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. No inspector, whether appointed by the
Board of Directors or by the person acting as presiding officer of the meeting,
need be a shareholder.
Section 1.16 ....Proxies.
(1) Appointment. At all meetings of shareholders, a shareholder may vote his or
her shares in person or by proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by signing an appointment form, either
personally or by his or her attorney-in-fact. If an appointment form expressly
provides, any proxy holder may appoint, in writing, a substitute to act in his
or her place. A telegraph, telex, or a cablegram, a facsimile transmission of a
signed appointment form, or a photographic, photostatic, or equivalent
reproduction of a signed appointment form is a sufficient appointment form.
(2) When Effective. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the corporation authorized to tabulate
votes. An appointment is valid for up to eleven months unless a longer period is
expressly provided in the appointment form. An appointment of a proxy is
revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest.
<PAGE>
Section 1.17 ....Shareholder Nominations and Proposals. Any shareholder
nomination for director or proposal for action at a forthcoming shareholder
meeting must be delivered to the corporation no later than the deadline for
submitting shareholder proposals pursuant to Securities Exchange Commission
Regulations Section 240.14a-8. The presiding officer at any shareholder meeting
shall not be required to recognize any nomination or proposal which did not
comply with such deadline.
Section 1.18 ....Action by Shareholders Without Meeting.
(1) Requirements for Written Consents. Any action required or permitted by the
Act to be taken at any annual or special meeting of shareholders may be taken
without a meeting, without prior notice, and without a vote if one or more
written consents describing the action taken shall be signed and dated by the
holders of outstanding stock entitled to vote thereon having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Such consents must be delivered to the principal office of the
corporation in Florida, the corporation's principal place of business, the
Secretary, or another officer or agent of the corporation having custody of the
books in which proceedings of meetings of shareholders are recorded. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the date of the earliest dated consent delivered in
the manner required herein, written consents signed by the number of holders
required to take action are delivered to the corporation by delivery as set
forth in this Section.
(2) Revocation of Written Consents. Any written consent may be revoked prior to
the date that the corporation receives the required number of consents to
authorize the proposed action. No revocation is effective unless in writing and
until received by the corporation at its principal office in Florida or its
principal place of business, or received by the Secretary or other officer or
agent having custody of the books in which proceedings of meetings of
shareholders are recorded.
(3) Notice to Nonconsenting Shareholders. Within ten days after obtaining such
authorization by written consent, notice must be given in writing to those
shareholders who have not consented in writing or who are not entitled to vote
on the action. The notice shall fairly summarize the material features of the
authorized action and, if the action be such for which dissenters' rights are
provided under the Act, the notice shall contain a clear statement of the right
of shareholders dissenting therefrom to be paid the fair value of their shares
upon compliance with the provisions of the Act regarding the rights of
dissenting shareholders.
(4) Same Effect as Vote at Meeting. A consent signed under this Section has the
effect of a meeting vote and may be described as such in any document. Whenever
action is taken by written consent pursuant to this Section, the written consent
of the shareholders consenting thereto or the written reports of inspectors
appointed to tabulate such consents shall be filed with the minutes of
proceedings of shareholders.
<PAGE>
Section 1.19 ....Acceptance of Instruments Showing Shareholder Action. If the
name signed on a vote, consent, waiver, or proxy appointment corresponds to the
name of a shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver, or proxy appointment and give it effect as the act of a
shareholder. If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver, or proxy appointment and give
it effect as the act of the shareholder if any of the following apply:
(1) The shareholder is an entity and the name signed purports to be that of an
officer or agent of the entity;
(2) The name signed purports to be that of an administrator, executor, guardian,
personal representative, or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the corporation
is presented with respect to the vote, consent, waiver, or proxy appointment;
(3) The name signed purports to be that of a receiver or trustee in bankruptcy,
or assignee for the benefit of creditors of the shareholder and, if the
corporation requests, evidence of this status acceptable to the corporation is
presented with respect to the vote, consent, waiver, or proxy appointment;
(4) The name signed purports to be that of a pledgee, beneficial owner, or
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder is presented with respect to the vote, consent, waiver, or proxy
appointment; or
(5) Two or more persons are the shareholder as covenants or fiduciaries and the
name signed purports to be the name of at least one of the co-owners and the
person signing appears to be acting on behalf of all co-owners.
The corporation may reject a vote, consent, waiver, or proxy appointment if the
Secretary or other officer of agent of the corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE 4
Board of Directors
Section 1.20 ....General Powers and Number. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, the Board of Directors. The
corporation shall have seven (7) directors initially. The number of directors
may be increased or decreased from time to time by vote of a majority of the
entire Board of Directors, but shall never be less than four nor more than
eleven.
<PAGE>
Section 1.21 ....Qualifications. Directors must be natural persons who are
eighteen years of age or older but need not be residents of this state or
shareholders of the corporation.
Section 1.22 ....Term of Office. Each director shall hold office until the next
annual meeting of shareholders and until his or her successor shall have been
elected and, if necessary, qualified, or until there is a decrease in the number
of directors which takes effect after the expiration of his or her term, or
until his or her prior death, resignation or removal.
Section 1.23 ....Removal. The shareholders may remove one or more directors with
or without cause. A director may be removed by the shareholders at a meeting of
shareholders, provided that the notice of the meeting states that the purpose,
or one of the purposes, of the meeting is such removal.
Section 1.24 ....Resignation. A director may resign at any time by delivering
written notice to the Board of Directors or its Chairman (if any) or to the
corporation. A director's resignation is effective when the notice is delivered
unless the notice specifies a later effective date.
Section 1.25 ....Vacancies.
(1) Who May Fill Vacancies. Except as provided below, whenever any vacancy
occurs on the Board of Directors, including a vacancy resulting from an increase
in the number of directors, it may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the Board of
Directors, or by the shareholders. If the directors first fill a vacancy, the
shareholders shall have no further right with respect to that vacancy, and if
the shareholders first fill the vacancy, the directors shall have no further
rights with respect to that vacancy.
(2) Directors Electing by Voting Groups. Whenever the holders of shares of any
voting group are entitled to elect a class of one or more directors by the
provisions of the Articles of Incorporation, vacancies in such class may be
filled by holders of shares of that voting group or by a majority of the
directors then in office elected by such voting group or by a sole remaining
director so elected. If no director elected by such voting group remains in
office, unless the Articles of Incorporation provide otherwise, directors not
elected by such voting group may fill vacancies.
(3) Prospective Vacancies. A vacancy that will occur at a specific later date,
because of a resignation effective at a later date or otherwise, may be filled
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.
Section 1.26 ....Compensation. The Board of Directors, irrespective of any
personal interest of any of its members, may establish a reasonable compensation
of all directors for services to the corporation as directors, officers, or
otherwise, or may delegate such authority to an appropriate committee. The Board
of Directors also shall have the authority to provide for or delegate authority
to an appropriate committee to provide for reasonable pensions, disability or
death benefits, and other benefits or payments, to directors, officers, and
employees and to their families, dependents, estates, or beneficiaries on
account of prior services rendered to the corporation by such directors,
officers, and employees.
Section 1.1 .....
<PAGE>
Section 1.27 ....Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after the annual
meeting of shareholders and each adjourned session thereof. The place of such
regular meeting shall be the same as the place of the meeting of shareholders
which precedes it, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors may provide, by resolution, the
date, time, and place, either within or without the State of Florida, for the
holding of additional regular meetings of the Board of Directors without notice
other than such resolution.
Section 1.28 ....Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board (if any), the President or one-third
of the members of the Board of Directors. The person or persons calling the
meeting may fix any place, either within or without the State of Florida, as the
place for holding any special meeting of the Board of Directors, and if no other
place is fixed, the place of the meeting shall be the principal office of the
corporation in the State of Florida.
Section 1.29 ....Notice. Special meetings of the Board of Directors must be
preceded by at least two days' notice of the date, time, and place of the
meeting. The notice need not described the purpose of the special meeting.
Section 1.30 ....Waiver of Notice. Notice of a meeting of the Board of Directors
need not be given to any director who signs a waiver of notice either before or
after the meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting and waiver of any and all objections to the
place of the meeting, the time of the meeting, or the manner in which it has
been called or convened, except when a director states, at the beginning of the
meeting or promptly upon arrival at the meeting, any objection to the
transaction of business because the meeting is not lawfully called or convened.
Section 1.31 ....Quorum and Voting. A quorum of the Board of Directors consists
of a majority of the number of directors prescribed by these bylaws. If a quorum
is present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board of Directors. A director who is present at a
meeting of the Board of Directors or a committee of the Board of Directors when
corporate action is taken is deemed to have assented to the action taken unless:
(a) he or she objects at the beginning of the meeting (or promptly upon his or
her arrival) to holding it or transacting specified business at the meeting; or
(b) he or she votes against or abstains from the action taken.
Section 1.32 ....Conduct of Meetings.
(1) Presiding Officer. The Board of Directors may elect from among its members a
Chairman of the Board of Directors, who shall preside at meetings of the Board
of Directors. The Chairman, and if there be none, or in his or her absence, the
President, and in his or her absence, a Vice President in the order provided
under the Section of these bylaws titled 'Vice Presidents', and in their
absence, any director chosen by the directors present, shall call meetings of
the Board of Directors to order and shall act as presiding officer of the
meeting.
<PAGE>
(2) Minutes. The Secretary of the corporation shall act as secretary of all
meetings of the Board of Directors but in the absence of the Secretary, the
presiding officer may appoint any other person present to act as secretary of
the meeting. Minutes of any regular or special meeting of the Board of Directors
shall be prepared and distributed to each director.
(3) Adjournments. A majority of the directors present, whether or not a quorum
exists, may adjourn any meeting of the Board of Directors to another time and
place. Notice of any such adjourned meeting shall be given to the directors who
are not present at the time of the adjournment and, unless the time and place of
the adjourned meeting are announced at the time of the adjournment, to the other
directors.
(4) Participation by Conference Call or Similar Means. The Board of Directors
may permit any or all directors to participate in a regular or a special meeting
by, or conduct the meeting through the use of, any means of communication by
which all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
Section 1.33 ....Committees. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
Executive Committee and one or more other committees (which may include, by way
of example and not as a limitation, a Compensation Committee, an Audit Committee
and a Nominating Committee) each of which, to the extent provided in such
resolution, shall have and may exercise all the authority of the Board of
Directors, except that no such committee shall have the authority to:
(1) approve or recommend to shareholders actions or proposals required by the
Act to be approved by shareholders;
(2) fill vacancies on the Board of Directors or any committee thereof;
(3) adopt, amend, or repeal these bylaws;
(4) authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the Board of Directors; or
(5) authorize or approve the issuance or sale or contract for the sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the Board of Directors may authorize a
committee (or a senior executive officer of the corporation) to do so within
limits specifically prescribed by the Board of Directors.
Each committee must have two or more members, who shall serve at the pleasure of
the Board of Directors. The Board of Directors, by resolution adopted in
accordance with this Section, may designate one or more directors as alternate
members of any such committee, who may act in the place and stead of any absent
member or members at any meeting of such committee. The provisions of these
bylaws which govern meetings, notice and waiver or notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members as
well.
<PAGE>
Section 1.34 ....Action Without Meeting. Any action required or permitted by the
Act to be taken at a meeting of the Board of Directors or a committee thereof
may be taken without a meeting if the action is taken by all members of the
Board or of the committee. The action may be evidenced by one or more written
consents describing the action taken, signed by each director or committee
member and retained by the corporation. Such action shall be effective when the
last director or committee member signs the consent, unless the consent
specifies a different effective date. A consent signed under this Section has
the effect of a vote at a meeting and may be described as such in any document.
ARTICLE 5
Officers
Section 1.35 ....Number. The principal officers of the corporation may be a
President, a Chief Operating Officer, the number of Vice Presidents, if any, as
authorized from time to time by the Board of Directors, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. The Board of Directors may also authorize
any duly appointed officer to appoint one or more officers or assistant
officers. The same individual may simultaneously hold more than one office.
Section 1.36 ....Election and Term of Office. The officers of the corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as is practicable.
Each officer shall hold office until his or her successor shall have been duly
elected or until his or her prior death, resignation, or removal.
Section 1.37 ....Removal. The Board of Directors may remove any officer and,
unless restricted by the Board of Directors, an officer may remove any officer
or assistant officer appointed by that officer, at any time, with or without
cause and notwithstanding the contract rights, if any, of the officer removed.
The appointment of an officer does not of itself create contract rights.
Section 1.38 ....Resignation. An officer may resign at any time by delivering
notice to the corporation. The resignation shall be effective when the notice is
delivered, unless the notice specifies a later effective date and the
corporation accepts the later effective date. If a resignation is made effective
at a later date and the corporation accepts the future effective date, the
pending vacancy may be filled before the effective date but the successor may
not take office until the effective date.
Section 1.39 ....Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification, or otherwise, shall be filled as soon
thereafter as practicable by the Board of Directors for the unexpired portion of
the term.
<PAGE>
Section 1.40 ....President. The President shall be the principal executive
officer of the corporation and, subject to the direction of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. The President shall, when present, preside at all
meetings of the shareholders and, if no Chairman of the Board has been elected,
shall preside at all meetings of the Board of Directors. The President shall
have authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint such agents and employees of the corporation as he or she
shall deem necessary, to prescribe their powers, duties and compensation, and to
delegate authority to them. Such agents and employees shall hold office at the
discretion of the President. The President shall have authority to sign
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors, and to execute and
acknowledge, on behalf of the corporation, all deeds, mortgages, bonds,
contracts, leases, reports, and all other documents or instruments necessary or
proper to be executed in the course of the corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, the President may
authorize any Vice President or other officer or agent of the corporation to
execute and acknowledge such documents or instruments in his or her place and
stead. In general he or she shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
Section 1.41 ....Chief Operating Officer. The Chief Operating Officer shall: (a)
be responsible for supervising and controlling the daily operations of the
corporation; and (b) in general perform all duties incident to the office of
Chief Operating officer and have such other duties and exercise such authority
as from time to time may be delegated or assigned by the President or by the
Board of Directors.
Section 1.42 ....Vice Presidents. In the absence of the President or in the
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, the
Vice President, if any (or in the event there be more than one Vice President,
the Vice Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their election), shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice President
may sign certificates for shares of the corporation, the issuance of which shall
have been authorized by resolution of the Board of Directors; and shall perform
such other duties and have such authority as from time to time may be delegated
or assigned to him or her by the President or by the Board of Directors. The
execution of any instrument of the corporation by any Vice President shall be
conclusive evidence, as to third parties, of his or her authority to act in the
stead of the President.
<PAGE>
Section 1.43 ....Secretary. The Secretary shall: (a) keep, or cause to be kept,
minutes of the meetings of the shareholders and of the Board of Directors (and
of committees thereof) in one or more books provided for that purpose (including
records of actions taken by the shareholders or the Board of Directors (or
committees thereof) without a meeting); (b) be custodian of the corporate
records and of the seal of the corporation, if any, and if the corporation has a
seal, see that it is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (c) authenticate the
records of the corporation; (d) maintain a record of the shareholders of the
corporation, in a form that permits preparation of a list of the names and
addresses of all shareholders, by class or series of shares and showing the
number and class or series of shares held by each shareholder; (e) have general
charge of the stock transfer books of the corporation; and (f) in general
perform all duties incident to the office of Secretary and have such other
duties and exercise such authority as from time to time may be delegated or
assigned by the President or by the Board of Directors.
Section 1.44 ....Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) maintain
appropriate accounting records; (c) receive and give receipts for monies due and
payable to the corporation from any source whatsoever, and deposit all such
monies in the name of the corporation in such banks, trust companies, or other
depositaries as shall be selected in accordance with the provisions of these
bylaws; and (d) in general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other authority as from
time to time may be delegated or assigned by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his or her duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
Section 1.45 ....Assistant Secretaries and Assistant Treasurers. There shall be
such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and Assistant Treasurers,
in general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 1.46 ....Other Assistants and Acting Officers. The Board of Directors
shall have the power to appoint, or to authorize any duly appointed officer of
the corporation to appoint, any person to act as assistant to any officer, or as
agent for the corporation in his or her stead, or to perform the duties of such
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors or an authorized officer shall have the power to perform
all the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
appointing officer.
Section 1.47 ....Salaries. The salaries of the principal officers shall be fixed
from time to time by the Board of Directors or by a duly authorized committee
thereof, and no officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a director of the corporation.
<PAGE>
ARTICLE 6
Contracts, Checks and Deposits; Special Corporate Acts
Section 1.48 ....Contracts. The Board of Directors may authorize any officer or
officers, or any agent or agents to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge made by the corporation shall be executed in the name of the corporation
by the President or one of the Vice Presidents. The Secretary or an Assistant
Secretary, when necessary or required, shall attest and affix the corporate
seal, if any, thereto. When so executed, no other party to such instrument or
any third party shall be required to make any inquiry into the authority of the
signing officer or officers.
Section 1.49 ....Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the corporation, shall be signed by such officer or officers, agent or agents
of the corporation and in such manner as shall from time to time be determined
by or under the authority of a resolution of the Board of Directors.
Section 1.50 ....Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositaries as may be selected by or under the
authority of a resolution of the Board of Directors.
Section 1.51 ....Voting of Securities Owned by Corporation. Subject always to
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corporation by the President of this corporation if he or she be present, or in
his or her absence by any Vice President of this corporation who may be present,
and (b) whenever, in the judgment of the President, or in his or her absence, of
any Vice President, it is desirable for this corporation to execute a proxy or
written consent in respect of any such shares or other securities, such proxy or
consent shall be executed in the name of this corporation by the President or
one of the Vice Presidents of this corporation, without necessity of any
authorization by the Board of Directors, affixation of corporate seal, if any,
or countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power, and authority to vote the shares or
other securities issued by such other corporation and owned or controlled by
this corporation the same as such shares or other securities might be voted by
this corporation.
<PAGE>
ARTICLE 7
Certificates for Shares; Transfer of Shares
Section 1.52 ....Consideration for Shares. The Board of Directors may authorize
shares to be issued for consideration consisting of any tangible or intangible
property or benefit to the corporation, including cash, promissory notes,
services performed, promises to perform services evidenced by a written
contract, or other securities of the corporation. Before the corporation issues
shares, the Board of Directors shall determine that the consideration received
or to be received for the shares to be issued is adequate. The determination of
the Board of Directors is conclusive insofar as the adequacy of consideration
for the issuance of shares relates to whether the shares are validly issued,
fully paid, and nonassessable. The corporation may place in escrow shares issued
for future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in respect
of the shares against this purchase price, until the services are performed, the
note is paid, or the benefits are received. If the services are not performed,
the note is not paid, or the benefits are not received, the corporation may
cancel, in whole or in part, the shares escrowed or restricted and the
distributions credited.
Section 1.53 ....Certificates for Shares. Every holder of shares in the
corporation shall be entitled to have a certificate representing all shares to
which he or she is entitled unless the Board of Directors authorizes the
issuance of some or all shares without certificates. Any such authorization
shall not affect shares already represented by certificates until the
certificates are surrendered to the corporation. If the Board of Directors
authorizes the issuance of any share without certificates, within a reasonable
time after the issue or transfer of any such shares, the corporation shall send
the shareholder a written statement of the information required by the Act or
these bylaws to be set forth on certificates, including any restrictions on
transfer. Certificates representing shares of the corporation shall be in such
form, consistent with the Act, as shall be determined by the Board of Directors.
Such certificates shall be signed (either manually or facsimile) by the
President or any Vice President or any other persons designated by the Board of
Directors and may be sealed with the seal of the corporation or a facsimile
thereof. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. Unless the
Board of Directors authorizes shares without certificates, all certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except as provided in these
bylaws with respect to lost, destroyed, or stolen certificates. The validity of
a share certificate is not affected if a person who signed the certificate
(either manually or in facsimile) no longer holds office when the certificate is
issued.
<PAGE>
Section 1.54 ....Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer, the corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications, and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
corporation with a request to register a transfer, the corporation shall not be
liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the corporation had no duty to inquire into
adverse claims or has discharged any such duty. The corporation may require
reasonable assurance that such endorsements are genuine and effective and
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
Section 1.55 ....Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation as required by
the Act of any restriction imposed by the corporation upon the transfer of such
shares.
Section 1.56 ....Lost, Destroyed, or Stolen Certificates. Unless the Board of
Director authorizes shares without certificates, where the owner claims that
certificates for shares have been lost, destroyed, or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (a) so requests before
the corporation has notice that such shares have been acquired by a bona fide
purchaser, (b) files with the corporation a sufficient indemnity bond if
required by the Board of Directors or any principal officer, and (c) satisfies
such other reasonable requirements as may be prescribed by or under the
authority of the Board of Directors.
Section 1.57 ....Stock Regulations. The Board of Directors shall have the power
and authority to make all such further rules and regulations not inconsistent
with law as they may deem expedient concerning the issue, transfer, and
registration of shares of the corporation.
ARTICLE 8
Seal
Section 1.58 ....Seal. The Board of Directors may provide for a corporate seal
for the corporation.
ARTICLE 9
Books and Records
Section 1.59 ....Books and Records.
(1) The corporation shall keep as permanent records minutes of all meetings of
the shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors in place of the Board of
Directors on behalf of the corporation.
(b) The corporation shall maintain accurate accounting records.
<PAGE>
c) The corporation or its agent shall maintain a record of the shareholders in
a form that permits preparation of a list of the names and addresses of all
shareholders in alphabetical order by class of shares showing the number and
series of shares held by each.
(d) The corporation shall keep a copy of all written communications within the
preceding three years to all shareholders generally or to all shareholders of a
class or series, including the financial statements required to be furnished by
the Act, and a copy of its most recent annual report delivered to the Department
of State.
Section 1.60 ....Shareholders' Inspection Rights. Shareholders are entitled to
inspect and copy records of the corporation as permitted by the Act.
Section 1.61 ....Distribution of Financial Information. The corporation shall
prepare and disseminate financial statements to shareholders as required by the
Act.
Section 1.62 ....Other Reports. The corporation shall disseminate such other
reports to shareholders as are required by the Act, including reports regarding
indemnification in certain circumstances and reports regarding the issuance or
authorization for issuance of shares in exchange for promises to render services
in the future.
ARTICLE 10
Indemnification
<PAGE>
Section 1.63 ....Provision of Indemnification. The corporation shall, to the
fullest extent permitted or required by the Act, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the corporation to provide broader indemnification
rights than prior to such amendment), indemnify its Directors against any and
all Liabilities, and advance any and all reasonable Expenses, incurred thereby
in any Proceeding to which any such Director is a Party or in which such
Director is deposed or called to testify as a witness because he or she is or
was a Director of the corporation. The rights to indemnification granted
hereunder shall not be deemed exclusive of any other rights to indemnification
against Liabilities or the advancement of Expenses which a Director may be
entitled under any written agreement, Board resolution, vote of shareholders,
the Act, or otherwise. The corporation may, but shall not be required to,
supplement the foregoing rights to indemnification against Liabilities and
advancement of Expenses by the purchase of insurance on behalf of any one or
more of its Directors whether or not the corporation would be obligated to
indemnify or advance Expenses to such Director under this Article. For purposes
of this Article, the term 'Directors' includes former directors and any
directors who are or were serving at the request of the corporation as
directors, officers, employees, or agents of another corporation, partnership,
joint venture, trust, or other enterprise, including, without limitation, any
employee benefit plan (other than in the capacity as agents separately retained
and compensated for the provision of goods or services to the enterprise,
including, without limitation, attorneys-at-law, accountants, and financial
consultants). All other capitalized terms used in this Article and not otherwise
defined herein shall have the meaning set forth in Section 607.0850, Florida
Statutes (1997). The provisions of this Article are intended solely for the
benefit of the indemnified parties described herein, their heirs and personal
representatives and shall not create any rights in favor of third parties. No
amendment to or repeal of this Article shall diminish the rights of
indemnification provided for herein prior to such amendment or repeal.
ARTICLE 11
Amendments
Section 1.64 ....Power to Amend. These bylaws may be amended or repealed by
either the Board of Directors or the shareholders, unless the Act reserves the
power to amend these bylaws generally or any particular bylaw provision, as the
case may be, exclusively to the shareholders or unless the shareholders, in
amending or repealing these bylaws generally or any particular bylaw provision,
provide expressly that the Board of Directors may not amend or repeal these
bylaws or such bylaw provision, as the case may be.
ACCUSTAFF INCORPORATED
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK PLAN
AMENDED AND RESTATED
ACCUSTAFF INCORPORATED
NON-EMPLOYEE DIRECTOR STOCK PLAN
PURPOSES
The purposes of the AccuStaff Incorporated Non-Employee Director Stock
Option Plan are to provide an incentive and reward to the Company's non-employee
directors.
DEFINITIONS
2.1 For purposes of the Plan the following terms shall have the definition which
is attributed to them unless another definition is clearly indicated by a
particular usage and context.
(a) 'Agreement' means the written document issued by the Board to a Participant
whereby an Award is made to that Participant.
(b) 'Award' means the issuance pursuant to the Plan of an Option.
(c) 'Awarded Shares' means Shares subject to outstanding Awards.
(d) 'Board' means the Company's Board of Directors.
(e) "Change in Control" shall mean the occurrence of either of the following
events:
(i) A change in the composition of the Board of Directors as a result of which
fewer than one-half of the incumbent directors are directors who either:
(1) Had been directors of the Company 24 months prior to such change; or
(2) Were elected, or nominated for election, to the Board of Directors with the
affirmative votes of at least a majority of the directors who had been directors
of the Company 24 months prior to such change and who were still in office at
the time of the election or nomination; or
<PAGE>
8
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of the
Exchange Act), other than any person who is a shareholder of the Company on or
before the effective date of the Plan, by the acquisition or aggregation of
Securities is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 50 percent or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart from
rights accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that any change in the
relative beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of outstanding shares
of Base Capital Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
the Company.
(f) 'Code'means the Internal Revenue Code of 1986, as amended.
(g) 'Company' means AccuStaff Incorporated, a corporation incorporated under the
laws of the state of Florida, and any successor thereto.
(h) 'Director' means a member of the Board.
(i) 'Effective Date of Grant' means the effective date of grant for each Option
established by Section 5.1 of the Plan.
(j) 'Employee' means any individual who performs services as a common law
employee for the Company, a Parent or Subsidiary, and is included on the regular
payroll of the Company, a Parent or Subsidiary.
(k) 'Fair Market Value' means the value established by the Board based upon such
factors as the Board in its sole discretion shall decide including, but not
limited to, a valuation prepared by an independent third party appraiser
selected, or approved, by the Board. If at any time the Stock is traded on an
established trading system, it means the last sale price reported on any stock
exchange or over-the-counter trading system on which Shares are trading on a
specified date or, if not so trading, the average of the closing bid and asked
prices for a Share on a specified date. If no sale has been made on the
specified date, then prices on the last preceding day on which any such sale
shall have been made shall be used in determining fair market value under either
method prescribed in the previous sentence.
(l) 'Option' means the right to purchase from the Company a stated number of
Shares at a specified price.
(m) 'Option Price' means the purchase price per Share subject to an Option.
<PAGE>
(n) 'Parent' means any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company if, at the time of a granting of an
option, each of the corporations (other than the Company) in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain within the
meaning of Code Section 424(e) and any regulations or rulings promulgated
thereunder.
(o) 'Participant' means a Director who has received an Award under the Plan.
(p) 'Permanent and Total Disability' shall have the same meaning as given to
that term by Code Section 22(e)(3) and any regulations or rulings promulgated
thereunder.
(q) 'Plan' means the AccuStaff Incorporated Non-Employee Director Stock Plan, as
evidenced herein and as amended from time to time.
(r) 'Rule 16b-3" means Rule 16b-3 as promulgated by the Securities and Exchange
Commission under the 1934 Act, or any successor rule or regulation thereto.
(s) 'Share' means one share of the common stock, $.01 par value, of the Company.
(t) 'Subsidiary' means any corporation in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the Award, each of
the corporations (other than the last corporation) in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain, within the meaning of
Code Section 424(f) and any regulations or rulings promulgated thereunder.
(u) '1933 Act' means the Securities Act of 1933, as amended.
(v) '1934 Act' means the Securities Exchange Act of 1934, as amended.
ADMINISTRATION
3.1 The Plan is intended to meet the requirements of Rule 16b-3 adopted under
the 1934 Act and accordingly is intended to be self-governing. To this end, the
Plan requires no discretionary action by any administrative body with regard to
any transaction under the Plan.
3.2 The Plan shall be administered by the full Board.
<PAGE>
3.3 The action of a majority of the Board at which a quorum is present, or an
action approved in writing by a majority of the Board, shall be the valid
actions of the Board.
3.4 The Board shall have the authority to interpret and construe the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the details and provisions of each Agreement and make all other determinations
necessary or advisable for the administration of the Plan, including, without
limitation, the amending or modifying of outstanding Options or Awards, provided
that the Participant consents to such action. The Board shall also have the
discretion and authority to specify, with respect to Options or Awards of a
particular Participant, the effect upon such Participant's right to exercise an
Option or Award upon death, which effect might include acceleration of the date
at which an Option or Award may be exercised in full; provided, however, that in
no event may an Option or Award be exercised after the expiration of ten (10)
years from the Effective Date of Grant. The interpretation and construction by
the Board of any provisions of the Plan or any Option or Award granted under it
and all actions of the Board shall be binding on all parties hereto. No member
of the Board shall be liable for any action or determination made in good faith
with respect to the Plan or any Option or Award granted under it.
ELIGIBILITY
4.1 Each Director who is not an Employee shall be a Participant.
AWARD OF OPTION
5.1 (a) On the date on which a Participant is first elected or appointed as a
Director of the Company during the existence of the Plan, such Participant shall
automatically be granted a non-qualified Option to purchase 60,000 Shares (an
'Initial Grant').
(b) Each year on the date on which a Participant is reelected as a Director of
the Company during the existence of the Plan, such Participant shall
automatically be granted a non-qualified Option to purchase 20,000 Shares (an
'Annual Grant').
(c) The maximum number of Shares (underlying Options granted pursuant to
Sections 5.1(a) and 5.1(b)) granted to a Participant serving as a Director of
the Company prior to the Company's 1996 annual meeting of stockholders shall not
exceed 160,000 during the lifetime of his service to the Company. The maximum
number of Shares (underlying Options granted pursuant to Sections 5.1(a) and
5.1(b)) granted to a Participant first elected a Director of the Company on or
after the Company's 1996 annual meeting of stockholders shall not exceed 100,000
during the lifetime of his service to the Company.
<PAGE>
(d) The Board shall have the authority to grant additional Options, in
excess of those described in Sections 5.1(a) and 5.1(b), to a Participant as the
Board may determine in its discretion.
5.2 The Option Price per share shall be the Fair Market Value of a Share on the
Effective Date of Grant.
STOCK
6.1 The aggregate number of Shares which may be issued under the Plan shall be
1,600,000 Shares.
6.2 In the event that any outstanding Award under the Plan expires or is
terminated for any reason, the Awarded Shares subject to that Award may again be
the subject of an Award under the Plan.
TERMS AND CONDITIONS
7.1 Awards granted pursuant to the Plan shall be evidenced by Agreements, which
Agreements shall contain or shall be subject to the following terms and
conditions, whether or not such terms and conditions are specifically included
therein:
(a) Number of Shares. Each Initial Grant Agreement shall state that it pertains
to 60,000 Shares. Each Annual Grant Agreement shall state that is pertains to
20,000 Shares.
(b) Date. Each Agreement shall state the Effective Date of Grant.
(c) Price. Each Agreement shall state the Option Price.
(d) Method and Time of Payment. With respect to any Award, or portion thereof,
the Option Price shall be payable on the exercise of the Award and shall be paid
in cash, in Shares (including Shares acquired pursuant to the Plan), or a
combination of both. Shares transferred in payment of the Option Price shall be
valued as of date of transfer based on their then Fair Market Value.
(e) Transfer of Option or Stock. No Award shall be transferable by the
Participant, except by will or the laws of descent and distribution or to the
extent such transfer is to a member of the Optionee's immediate family or to a
trust for the benefit of such an immediate family member. If an option is
transferred to any member of the Optionee's immediate family or to a trust for
the benefit of such an immediate family member, it shall be exercisable solely
by the transferee.
<PAGE>
(f) Recapitalization. Appropriate adjustments shall be made in the number of
Awarded Shares and in the aggregate number of Shares which may be issued under
the Plan in order to give effect to changes made in the number of outstanding
Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change. Notwithstanding the foregoing, (i) Options subject to grant or
previously granted under the Plan at the time of any event described above shall
be subject to only such adjustment as shall be necessary to maintain the
proportionate interest of the Participant and preserve, without exceeding, the
value of such Options, and (ii) the number of Shares subject to award under the
Plan at the time of any event described above shall be subject to only such
adjustment as shall be necessary to maintain the relative proportionate interest
represented by such Shares immediately prior to any such event.
(g) Investment Purpose.
(i) The Company shall not be obligated to sell or issue any Shares pursuant to
any Award unless such Shares are at the time effectively registered or
exempt from registration under the 1933 Act. The determination of whether a
Share is exempt from registration shall be made by the Company's legal
counsel and its determination shall be conclusive and binding on all
parties hereto.
(ii) Notwithstanding anything in the Plan to the contrary, each Award under the
Plan shall be granted on the condition that the purchases of Shares
thereunder shall be for investment purposes and not with a view for resale
or distribution except that in the event the Shares subject to such Award
are registered under the 1933 Act, or in the event of a resale of such
Shares without such registration that would otherwise be permissible, such
condition shall be inoperative if in the opinion of counsel for the Company
such condition is not required under the 1933 Act or any other applicable
law, regulation, or rule of any governmental agency.
(h) Vesting Schedule. An Option may not be exercised prior to the date it is
vested. Each Initial Grant shall be subject to a vesting schedule which will
provide that 20% of the total Shares subject to the Option shall vest on each of
the first five (5) anniversaries of the Effective Grant Date. Each Annual Grant
shall be subject to a vesting schedule which will provide that 33 1/3% of the
total Shares subject to the Option shall vest on each of the first three (3)
anniversaries of the Effective Grant Date.
<PAGE>
(i) Duration of Award. Options granted pursuant to the Plan will have a term of
ten (10) years from the Effective Date of Grant. An Option granted pursuant to
an Award shall terminate when it has been fully exercised, unless terminated
sooner pursuant to the provisions of this paragraph 7.1(i).
If for any reason a Participant ceases to be a Director of the Company one
year or more after the Director's initial election or appointment to the Board
while holding an Option granted under the Plan, such Options as have vested on
or prior to such time shall continue to be exercisable for a period of three (3)
years after such termination or the remainder of the term of the Option,
whichever is shorter. If for any reason a Participant ceases to be a Director of
the Company within one year after the Director's initial election or appointment
to the Board, such Option shall be canceled as of the date of such termination.
(j) Effect of Death or Disability. The Committee may determine, at the time
of granting an Option or thereafter, the affect upon an individual's right to
exercise such Option of the individual's death or Disability, which affect may
include immediate or deferred termination of such individual's rights under the
Option, or acceleration of the date at which an Option may be exercised in full.
(k) Effect of Change in Control. The Committee may determine, at the time
of granting an Option or thereafter, that such Option shall become exercisable
on an accelerated basis in the event that a Change in Control occurs with
respect to the Company (and the Committee shall have the discretion to modify
the definition of a Change in Control in a particular Option Agreement). If the
Committee finds that there is a reasonable possibility that, within the
succeeding six months, a Change in Control will occur with respect to the
Company, then the Committee may determine that all outstanding Options shall be
exercisable on an accelerated basis.
7.2 The Company may place such legends on stock certificates representing the
Shares as the Company, in its sole discretion, deems necessary or appropriate to
reflect restrictions under the Plan, the Agreement, the Code, the securities
laws or otherwise.
7.3 Notwithstanding any provision herein to the contrary, service as a Director
shall be at the pleasure of the shareholders of the Company. Nothing contained
in the Plan or in any Award granted pursuant to it shall confer upon any
Participant a right to continue as a Director.
<PAGE>
7.4 Any person entitled to exercise an Option may do so in whole or in part by
delivering to the Company at its principal office, attention Corporate
Secretary, a written notice of exercise. The written notice shall specify the
number of Shares for which an option is being exercised. The notice shall be
accompanied by full payment of the option Price for the Shares being purchased.
During the Participant's lifetime, an option may be exercised only by the
Participant, or on the Participant's behalf by the Participant's legal guardian.
7.5 A Participant shall have no rights as a stockholder with respect to any
Shares subject to an Option until the date of the issuance of a stock
certificate to him for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Plan Section 7.1(f).
AMENDMENT OR DISCONTINUANCE OF PLAN
8.1 The Board may at any time amend, suspend or discontinue the Plan; provided,
however, that without further approval of the shareholders of the Company no
amendments by the Board shall:
(a) Change the class of persons eligible to participate;
(b) Increase the aggregate number of Shares which may be issued under the Plan,
except as provided in Section 6.1 of the Plan; or
(c) Otherwise be made if shareholder approval is required to satisfy the
requirements of Rule 16(b)(3) promulgated under the 1934 Act.
8.2 No amendment to the Plan shall alter or impair any Award granted under the
Plan without the consent of the holders thereof.
8.3 Articles 4, 5 and 7 of the Plan, in the aggregate, may not be amended more
than once every six months, unless such amendment is permitted by Rule
16b-3(c)(2)(ii)(B) under the 1934 Act.
INDEMNIFICATION OF BOARD
<PAGE>
In addition to such other rights of indemnification as they may have as
Directors, the members of the Board shall be indemnified by the Company against
the reasonable expenses, including attorneys' fees, actually incurred in
connection with the defense of any pending, threatened or possible action, suit
or proceeding, or in connection with any pending, threatened or possible appeal
therein, to which they or any of them may be a party by reason of any actual or
alleged action taken or failure to act under or in connection with the Plan or
any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Company) or paid
by them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such Board member is liable for gross negligence or
willful misconduct in the performance of his duties; provided that within sixty
days after institution of any such action, suit or proceeding a Board member
shall in writing offer the Company the opportunity, at its own expense, to
handle and defend the same.
NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Participant to
exercise such Option.
EFFECTIVE DATE; DURATION OF THE PLAN
11.1 The Plan shall become effective as of December 29, 1993.
11.2 No Award may be made after the tenth anniversary of the effective date of
the Plan.
REVOLVING CREDIT
AND
REIMBURSEMENT AGREEMENT
by and among
MODIS PROFESSIONAL SERVICES, INC., as Borrower
and
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
FLEET NATIONAL BANK,
as Syndication Agent
and
FIRST UNION NATIONAL BANK,
as Co-Syndication Agent
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
and
NATIONSBANC MONTGOMERY SECURITIES LLC
as Lead Arranger
October 30, 1998
<PAGE>
<TABLE>
<CAPTION>
vii
TABLE OF CONTENTS
Page
ARTICLE I Definitions and Terms
<S> <C> <C>
1.01 Definitions..............................................................................................2
1.02 Accounting Terms........................................................................................26
1.03 Cross References........................................................................................26
1.04 Accounting and Financial Determinations.................................................................27
1.05 General Provisions Relating to Definitions..............................................................27
1.06 Time....................................................................................................27
ARTICLE II The Loans
2.01 Revolving Credit Facilities.............................................................................28
2.02 Competitive Bid Loans...................................................................................32
2.03 Payment of Interest.....................................................................................35
2.04 Payment of Principal....................................................................................36
2.05 Non-Conforming Payments.................................................................................36
2.06 Borrower's Account......................................................................................37
2.07 Notes...................................................................................................37
2.08 Reductions..............................................................................................38
2.09 Conversions and Elections of Subsequent Interest Periods................................................38
2.10 Increase and Decrease in Amounts........................................................................39
2.11 Pro Rata Payments.......................................................................................39
2.12 Unused Fee..............................................................................................39
2.13 Deficiency Advances.....................................................................................40
2.14 Use of Proceeds.........................................................................................40
2.15 Swing Line..............................................................................................40
2.16 Revolving Credit Facility Extension and Term Loan Option................................................41
2.17 The Euro................................................................................................43
ARTICLE III Letters of Credit
3.01 Letters of Credit.......................................................................................45
3.02 Reimbursement...........................................................................................45
3.03 Letter of Credit Fee....................................................................................49
3.04 Administrative Fees and Reserves........................................................................49
ARTICLE IV Change in Circumstances
4.01 Increased Cost and Reduced Return.......................................................................50
4.02 Limitation on Types of Loans............................................................................51
4.03 Illegality..............................................................................................52
4.04 Treatment of Affected Loans................ .............................................................52
4.05 Compensation............................................................................................53
4.06 Taxes...................................................................................................53
ARTICLE V Guaranties
5.01 Guaranties..............................................................................................56
ARTICLE VI Conditions to Making Loans and Issuing
6.01 Conditions of Advance and Issuance of Letters of Credit.................................................57
6.02 Conditions of Loans.....................................................................................58
ARTICLE VII Representations and Warranties
7.01 Representations and Warranties..........................................................................60
ARTICLE VIII Affirmative Covenants
8.01 Financial Reports, Etc..................................................................................67
8.02 Maintain Properties.....................................................................................68
8.03 Existence, Qualification, Etc...........................................................................68
8.04 Regulations and Taxes...................................................................................68
8.05 Insurance. ............................................................................................68
8.06 True Books..............................................................................................69
8.07 Year 2000 Compliance....................................................................................69
8.08 Right of Inspection.....................................................................................69
8.09 Observe all Laws........................................................................................69
8.10 Officer's Knowledge of Default..........................................................................69
8.11 Suits or Other Proceedings..............................................................................69
8.12 Notice of Discharge of Hazardous Material or Environmental Complaint. .................................70
8.13 Environmental Compliance................................................................................70
8.14 Indemnification.........................................................................................70
8.15 Further Assurances......................................................................................70
8.16 ERISA Requirement.......................................................................................70
8.17 Continued Operations....................................................................................71
8.18 Use of Proceeds.........................................................................................71
ARTICLE IX Negative Covenants
9.01 Consolidated Leverage Ratio.............................................................................72
9.02 Consolidated Fixed Charge Ratio.........................................................................72
9.03 Consolidated Capitalization Ratio.......................................................................72
9.04 Indebtedness............................................................................................72
9.05 Transfer of Assets......................................................................................73
9.06 Investments; Acquisitions...............................................................................73
9.07 Liens...................................................................................................74
9.08 Restricted Payments.....................................................................................74
9.09 Merger or Consolidation.................................................................................75
9.10 Change in Control.......................................................................................75
9.11 Transactions with Affiliates............................................................................75
9.12 ERISA...................................................................................................75
9.13 Fiscal Year.............................................................................................76
9.14 Dissolution, etc........................................................................................76
9.15 Rate Hedging Obligations................................................................................76
9.16 Negative Pledge Clauses.................................................................................76
ARTICLE X Events of Default and Acceleration
10.01 Events of Default.......................................................................................77
10.02 Agent to Act............................................................................................80
10.03 Cumulative Rights.......................................................................................80
10.04 No Waiver...............................................................................................80
10.05 Allocation of Proceeds..................................................................................80
ARTICLE XI The Agent
11.01 Appointment, Powers and Immunities......................................................................82
11.02 Reliance by Agent.......................................................................................82
11.03 Defaults................................................................................................83
11.04 Rights as Lender........................................................................................83
11.05 Indemnification.........................................................................................83
11.06 Non-Reliance on Agent and Other Lenders.................................................................83
11.07 Resignation of Agent....................................................................................84
11.08 Fees....................................................................................................84
11.09 Other Agents............................................................................................84
ARTICLE XII Miscellaneous
12.01 Assignments and Participations..........................................................................85
12.02 Notices.................................................................................................86
12.03 Right of Setoff; Adjustments............................................................................87
12.04 Survival................................................................................................88
12.05 Expenses................................................................................................88
12.06 Amendments and Waivers..................................................................................89
12.07 Counterparts............................................................................................90
12.08 Waivers by Borrower.....................................................................................90
12.09 Termination.............................................................................................90
12.10 Replacement Lender......................................................................................90
12.11 Governing Law...........................................................................................91
12.12 Headings and References.................................................................................91
12.13 Severability............................................................................................91
12.14 Entire Agreement........................................................................................91
12.15 Agreement Controls......................................................................................91
12.16 Usury Savings Clause....................................................................................92
12.17 Confidentiality.........................................................................................92
EXHIBIT A Applicable Commitment Percentages........................................................108
EXHIBIT B Form of Assignment and Acceptance........................................................109
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative...........................................................................114
EXHIBIT D-1 Form of Borrowing Notice--Loans..........................................................115
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans...............................................117
EXHIBIT E Form of Interest Rate Selection Notice...................................................119
EXHIBIT F-1 Form of 364 Day Note.....................................................................121
EXHIBIT F-2 Form of 5 Year Note......................................................................126
EXHIBIT F-3 Form of Competitive Bid Note.............................................................131
EXHIBIT F-4 Form of Swing Line Note..................................................................137
EXHIBIT G Form of Competitive Bid Quote............................................................142
EXHIBIT H Form of Competitive Bid Quote Request....................................................144
EXHIBIT I-1 Form of Opinion of Borrower's Counsel....................................................145
EXHIBIT I-2 Form of Opinion of Guarantors' Counsel...................................................146
EXHIBIT J Compliance Certificate...................................................................147
EXHIBIT K Form of Subsidiary and Suretyship Guaranty...............................................148
Schedule 1.02 Existing Letters of Credit
Schedule 1.03 Material Subsidiaries
Schedule 7.01(d) Subsidiaries and Investments
Schedule 7.01(f) Contingent Liabilities
Schedule 7.01(g) Liens
Schedule 7.01(j) Litigation
Schedule 7.01(t) Employment Matters
Schedule 8.05 Existing Insurance
Schedule 9.04 Indebtedness
</TABLE>
<PAGE>
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT, dated as of the 30th day of
October, 1998 (the "Agreement"), is made by and among:
MODIS PROFESSIONAL SERVICES, INC., a Florida corporation having its principal
place of business in Jacksonville, Florida (the "Borrower"); and
NATIONSBANK, NATIONAL ASSOCIATION (successor by merger of NationsBank, National
Association (South)), a national banking association organized and existing
under the laws of the United States of America and having its principal place of
business in Charlotte, North Carolina ("NationsBank") and the other Lenders
whose names are subscribed hereto and each other financial institution which may
hereafter execute and deliver an instrument of assignment with respect to this
Agreement pursuant to Section 12.01 (hereinafter NationsBank and such other
lenders may be referred to individually as a "Lender" or collectively as the
"Lenders"); and
NATIONSBANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders (in
such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make available to the
Borrower loans of up to $500,000,000 consisting of (a) a 364 day revolving
credit facility (the '364 Day Facility') and (b) a five year revolving credit
facility (the '5 Year Facility') with (i) a $40,000,000 sublimit for the
issuance of standby letters of credit, (ii) a $20,000,000 swing line facility
and (iii) a $50,000,000 sublimit for borrowing in British pounds sterling, the
proceeds of such revolving credit facilities to be used as provided in Section
2.14 hereof; and
WHEREAS, the Lenders are willing to make the loans with NationsBank to act as
administrative agent for the Lenders;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as follows:
10
<PAGE>
ARTICLE I
Definitions and Terms
1.01 Definitions. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms shall have the respective
meanings set forth below:
'Absolute Rate' has the meaning assigned to such term in Section 2.02(c)(ii)(C)
hereof;
'Absolute Rate Loan' means any Loan for which the rate of interest is
determined by reference to the Absolute Rate;
"Acquire" or "Acquisition", as applied to a Person, means the acquiring or
acquisition of a controlling interest in such Person by purchase (including all
or substantially all of the assets), exchange, issuance of stock or other
securities, or by merger, reorganization or other method;
"Adjusted CD Rate" means a per annum rate of interest equal to the sum of (i)
the CD Rate plus (ii) the Assessment Rate plus (iii) 10 basis points plus (iv)
the Applicable Margin;
"Adjusted Consolidated EBITDA" means Consolidated EBITDA; provided, however,
that with respect to an Acquisition which is accounted for as a "purchase", for
the Four-Quarter Period following the date of such Acquisition, the Consolidated
EBITDA shall include the results of operations of the Person or assets so
acquired which amounts shall be determined on a historical pro forma basis for
the Four-Quarter Period preceding or including the date of such Acquisition as
if such Acquisition had been consummated as a "pooling of interest", plus to the
extent applicable, any adjustments made in accordance with Securities and
Exchange Commission Rule 17 CFR 210.11-02;
"Advance" means a borrowing under (i) either of the Revolving Credit Facilities,
consisting of the aggregate principal amount of a Base Rate Loan or a Eurodollar
Loan, as the case may be or (ii) the Swing Line consisting of Swing Line Loans
or (iii) the Competitive Bid Facility consisting of Competitive Bid Loans;
'Advance Day Exchange Rate' means, with respect to a specified Advance or Loan
of an Alternative Currency, the Spot Rate of Exchange as of the date two
Business Days preceding the date such Advance is originally made, provided that,
if such Advance or Loan is continued for a subsequent Interest Period or
Converted pursuant to Section 2.09 the Advance Date Exchange Rate with respect
to such Loan shall be the Spot Rate of Exchange two Business Days preceding the
effective date of the latest Continuation or Conversion of such Advance or Loan;
and the Dollar Value of such Advance or Loan shall be adjusted as set forth in
Section 2.01(b); provided, further, that in the case of a drawing under a Letter
of Credit, the Spot Rate of Exchange shall be as of the date of such drawing;
'Alternative Currency' means, with respect to Loans under the 5 Year Facility,
the British Pounds and Euro and, with the prior written consent of all Lenders
and the Agent, any other lawful currency other than Dollars which is freely
transferable and convertible into Dollars in the United States currency market;
provided, however, that an Alternative Currency shall only be available to the
Borrower if each Lender shall have access to such Alternative Currency on terms
reasonably acceptable to such Lender;
'Alternative Currency Equivalent Amount' means, with respect to a specified
Alternative Currency and a specified Dollar amount, the amount of such
Alternative Currency into which such Dollar amount would be converted, based on
the applicable Advance Day Exchange Rate;
'Alternative Currency Loan' means a Loan made in an Alternative Currency;
"Affiliate" means a Person (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with
the Borrower; (ii) which beneficially owns or holds 25% or more of any class of
the outstanding voting stock (or in the case of a Person which is not a
corporation, 25% or more of the equity interest) of the Borrower; or (iii) 25%
or more of any class of the outstanding voting stock of which is beneficially
owned or held by the Borrower. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting stock, by contract
or otherwise;
"Applicable Commitment Percentage" means, with respect to each Lender at any
time, a fraction, the numerator of which shall be such Lender's Revolving Credit
Commitment and the denominator of which shall be the Total Revolving Credit
Commitment, which Applicable Commitment Percentage for each Lender as of the
Closing Date is as set forth in Exhibit A; provided that the Applicable
Commitment Percentage of each Lender shall be increased or decreased to reflect
any assignments to or by such Lender effected in accordance with Section 12.01;
'Applicable Lending Office' means, for each Lender and for each Type of Loan,
the 'Lending Office' of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
office of such Lender (or an affiliate of such Lender) as such Lender may from
time to time specify (subject to the provisions of this Agreement) to the Agent
and the Borrower by written notice in accordance with the terms hereof as the
office by which its Loans of such Type are to be made and maintained;
"Applicable Margin" means that number of basis points per annum set forth below
in the case of each of a (i) Swing Line Loan or Eurodollar Loan made pursuant to
the 5 Year Facility, (ii) a Eurodollar Loan made pursuant to the 364 Day
Facility and (iii) with respect to the Unused Fee for the 5 Year Facility and
the 364 Day Facility, which number of basis points shall be the Applicable
Margin effective beginning on the first Business Day next following receipt by
the Agent of a Compliance Certificate pursuant to Section 8.01 hereof setting
forth the ratio of Net Funded Indebtedness to Adjusted Consolidated EBITDA, such
Applicable Margin to be that set forth opposite the respective ratio described
below:
<TABLE>
<CAPTION>
Applicable Margin
-------------------------------------------------------------
5 Year Facility 364 Day Facility
-------------------------- -------------------------
Ratio of Net Funded Eurodollar Loan
Indebtedness Adjusted to and Swing Unused Eurodollar Unused
Tier Consolidated EBITDA Line Loan Fee Loan Fee
- - ---- ------------------------------ --------------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
I Equal to or Less than
1.25 to 1.00 50 15 50 bp 12.5
II Greater than 1.25 to 1.00
but Equal to or Less than
2.25 to 1.00 62.5 20 62.5 17.5
III Greater than 2.25 to 1.00 75 25 75 22.5
</TABLE>
For a period of six full calendar months next following the Closing
Date the Applicable Margin for Eurodollar Loans and Swing Line Loans
and the Unused Fee shall be not less than Tier II and after such six
month period the Applicable Margin shall be based upon the most recent
Compliance Certificate furnished to the Agent;
'Applicable Rate' means the Eurodollar Rate applicable to any Alternative
Currency Loan;
"Applications and Agreements for Letters of Credit" means, collectively, the
Applications and Agreements for Letters of Credit executed by the Borrower from
time to time and delivered to NationsBank to support the issuance of Letters of
Credit;
"Assessment Rate" means, for any day, the annual assessment rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) which is payable by
NationsBank to the Federal Deposit Insurance Corporation (or any successor) for
deposit insurance for Dollar time deposits with NationsBank at the Principal
Office as determined by NationsBank. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Assessment
Rate;
"Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit B (with blanks appropriately filled in)
delivered to the Agent in connection with an assignment of a Lender's interest
under this Agreement pursuant to Section 12.01;
'Associated Costs' means a rate per annum equal to the arithmetic mean of the
percentage rates applicable to the Applicable Lending Office of the relevant
Lender according to the following formula:
Associated Costs BY + L(Y-X) + S x 0.01
per annum = ----------------------
100 - (B+L)
where:
B = The percentage of such Lender's eligible liabilities required, on the
first day of the Relevant Period, to be held in a non-interest-bearing
deposit account with the Bank of England pursuant to the cash ratio
requirements of the Bank of England.
Y = The interest rate at which British Pound deposits in an amount
comparable to the aggregate principal amount of the relevant Loan are
offered by such Lender to leading banks in the London interbank market at
or about 11:00 a.m. (London time) on the first day of the Relevant Period
for a period comparable to the Relevant Period.
L = The percentage of eligible liabilities which the Bank of England, as at
the first day of the Relevant Period, requires such Lender to maintain as
interest bearing special deposits with the Bank of England.
X = The rate per annum payable by the Bank of England to the Lender on
interest bearing special deposits.
S = The rate payable by the Lender to the Financial Services Authority
pursuant to the Fees Regulations (but, for this purpose, the figure at
paragraph [2.02b]/[2.03b] of the Fees Regulations shall be deemed to be
zero) and expressed in pounds per 1,000,000 of the Fee Base of the Lender.
(a) For the purposes of this definition:
(i) "eligible liabilities" and "special deposits" shall have the
meanings ascribed to them from time to time by the Bank of
England;
(ii) "Relevant Period" means, if the Interest Period with respect
to the relevant Loan is three months or less, the duration of
such Interest Period or, if such Interest Period is longer than
three months, each period of three months and any necessary
shorter period in such Interest Period;
(iii) "Fee Regulations" means the Banking Supervision (Fees)
Regulations 1998 or such other regulations as may be in force
from time to time in respect of the payment of fees for banking
supervision; and
(iv) "Fee Base" shall bear the meaning ascribed to it, and shall
be calculated in accordance with, the Fees Regulations.
(b) In the application of the above formula, B, Y, L, X, S and Z will
be included in the formula as decimal fractions and not as
percentages, e.g. if B = 0.5% and Y = 15%, BY will be calculated as
0.5 x 15 and not as 0.5% x 15%.
(c) Associated Costs shall be computed by the applicable Lender on the
first day of each Relevant Period, and shall, if necessary, be rounded
upward to the nearest 1/10,000 of 1%. If there is more than one
Relevant Period comprised in the relevant Interest Period, then the
Associated Costs for that Interest Period shall be the weighted
average of the amounts so computed for the Relevant Periods comprised
in that Interest Period.
(d) Calculations will be made on the basis of a year of 365 days.
The "Associated Costs" shall be increased by an amount which the applicable
Lender shall determine from time to time to be necessary to compensate such
Lender for the cost or loss to it of complying with any liquidity, monetary
control or prudential requirements of The Bank of England existing from time to
time.
"Authorized Representative" means any of the President, the Chief Financial
Officer or the Controller of the Borrower or any other person expressly
designated by the Board of Directors of the Borrower (or the appropriate
committee thereof) as an Authorized Representative of the Borrower, as set forth
from time to time in a certificate in the form attached hereto as ExhibitC;
"Base Loan" means any Loan for which the rate of interest is determined by
reference to the Base Rate;
"Base Rate" means, for any day, the rate per annum equal to the higher of (a)
the Federal Funds Rate for such day plus one-half of one percent (.5%) and (b)
the Prime Rate for such day. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective on the effective date of
such change in the Prime Rate or Federal Funds Rate;
"Base Rate Refunding Loan" means a Base Loan or Swing Line Loan made either to
(i) satisfy Reimbursement Obligations arising from a drawing under a Letter of
Credit or (ii) pay NationsBank in respect of Swing Line Outstandings;
"Board" means the Board of Governors of the Federal Reserve System (or any
successor body);
"Borrower's Account" means a demand deposit account number 3750165027, or any
successor account with the Agent, which may be maintained at one or more offices
of the Agent or an agent of the Agent;
"Borrowing Notice" means the notice delivered by an Authorized Representative in
connection with an Advance under either of the Revolving Credit Facilities or a
Swing Line Loan, in the forms attached hereto, respectively, as ExhibitsD-1 and
D-2;
'British Pound' means the lawful currency of England and Wales;
'Business Day' means (i) any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the States of New York, North Carolina or
Florida or is a day on which banking institutions located in such states are
authorized or required by law or other governmental action to close and (ii)
with respect to all notices, determinations, fundings and payments in connection
with any Eurodollar Loan, any day that is a Business Day described in clause (i)
above and that is also a day for trading by and between banks in Dollar deposits
in the applicable interbank Eurodollar market or in deposits in the applicable
Alternative Currency in the United States interbank market, as applicable;
"CD Rate" means, for any Swing Line Loan which bears interest at the Adjusted CD
Rate, the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitles "Select
Interest Rates" published weekly on Form H.15 as of the date hereof, or any
successor publication thereof, or if the foregoing publication or any successor
or substitute thereof shall not be published by the Federal Reserve System for
any week, then the weekly offering rate determined by NationsBank on the basis
of quotations for such certificates received by it from three certificate of
deposit dealers of recognized standing. Each change in the CD Rate shall be
effective on the date thereof, without notice to the Borrower;
"Capital Leases" means all leases which have been or should be capitalized in
accordance with Generally Accepted Accounting Principles as in effect from time
to time including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof;
"Closing Date" means the date as of which this Agreement is executed by the
Borrower, the Agent and the Lender and on which the conditions set forth in
Section 6.01 hereof have been satisfied;
"Code" means the Internal Revenue Code of 1986, as amended, any successor
provision or provisions and any regulations promulgated thereunder;
'Competitive Bid Borrowing' has the meaning assigned to such term in Section
2.02 hereof;
'Competitive Bid Facility' means the facility described in Section 2.02 hereof
providing for Competitive Bid Loans to the Borrower;
'Competitive Bid Loan Commitment' means the amount which a Lender has offered to
loan to the Borrower pursuant to a Competitive Bid Quote by such Lender, the sum
of all Competitive Bid Loans not to exceed the Total 5 Year Commitment;
'Competitive Bid Loans' means the Loans bearing interest at the Absolute Rate
provided for in Section 2.02 hereof;
'Competitive Bid Notes' means, collectively, the promissory notes of the
Borrower with respect to Competitive Bid Loans provided for by Section 2.02
hereof executed and delivered to the Lenders as provided in Section 2.07(c)
substantially in the form attached hereto as Exhibit F-3 and incorporated herein
by reference, with appropriate insertions as to dates and names of Lenders, and
all promissory notes delivered in substitution or exchange thereof, in each case
as the same shall be amended, modified or supplemented and in effect from time
to time;
'Competitive Bid Quote' means an offer in accordance with Section 2.02 hereof by
a Lender to make a Competitive Bid Loan with one single specified interest rate;
'Competitive Bid Quote Request' has the meaning assigned to such term in Section
2.02 hereof;
"Consistent Basis" in reference to the application of Generally Accepted
Accounting Principles means the accounting principles observed in the period
referred to are comparable in all material respects to those applied in the
preparation of the audited financial statements of the Borrower referred to in
Section 7.01(f)(i) hereof;
"Consolidated Capitalization Ratio" means the ratio of (a) Consolidated Funded
Indebtedness to (b) the sum of Consolidated Funded Indebtedness and Consolidated
Shareholders' Equity;
"Consolidated EBITDA" means, with respect to the Borrower and its Subsidiaries
for the Four-Quarter Period ending on the date of computation thereof, the sum
of, without duplication, (i) Consolidated Net Income, plus (ii) Consolidated
Interest Expense accrued during such period, plus (iii) taxes on income accrued
during such period, plus (iv) amortization accrued during such period, plus (v)
without duplication, any depreciation during such period, all determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis;
"Consolidated EBITDAR" means the sum of Consolidated EBITDA plus Consolidated
Rental Expense;
"Consolidated Fixed Charge Ratio" means, with respect to the Borrower and its
Subsidiaries for the Four-Quarter Period ending on the date of computation
thereof, the ratio of (a) Consolidated EBITDAR to (b) Consolidated Fixed
Charges;
"Consolidated Fixed Charges" means, with respect to Borrower and its
Subsidiaries, for the periods indicated, the sum of, without duplication, (i)
Consolidated Interest Expense, (ii)Consolidated Rental Expense, and (iii)
required principal payments of Consolidated Funded Indebtedness, including,
without duplication, payments made with respect to earn-out obligations, made
during the Four-Quarter Period ending on the date of computation thereof;
"Consolidated Funded Indebtedness" means Indebtedness for Money Borrowed of the
Borrower and its Subsidiaries and any liability associated with an earn-out
obligation arising in connection with an Acquisition which is recorded as a
liability on the consolidated balance sheet of the Borrower and its Subsidiaries
all as determined in accordance with Generally Accepted Accounting Principles;
"Consolidated Interest Expense" means, with respect to any period of computation
thereof, the gross interest expense of the Borrower and its Subsidiaries,
including without limitation (i) the amortization of debt discounts, (ii) the
amortization of all fees (including, without limitation, fees payable in respect
of a Swap Agreement and Letters of Credit) payable in connection with the
incurrence of Indebtedness to the extent included in interest expense, and (iii)
the portion of any liabilities incurred in connection with Capital Leases
allocable to interest expense, all determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles applied on a Consistent
Basis;
"Consolidated Leverage Ratio" means the ratio of Consolidated Funded
Indebtedness to Adjusted Consolidated EBITDA;
"Consolidated Net Income" means, for any period of computation thereof, the
gross revenues from operations of the Borrower and its Subsidiaries less all
operating and non-operating expenses of the Borrower and its Subsidiaries
including taxes on income, all determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles applied on a Consistent Basis; but
excluding as income: (i) net gains on the sale, conversion or other disposition
of capital assets, (ii)net gains on the acquisition, retirement, sale or other
disposition of capital stock and other securities of the Borrower or its
Subsidiaries, (iii) net gains on the collection of proceeds of life insurance
policies, (iv) any write-up of any asset, and (v) any other net gain or credit
of an extraordinary nature as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis;
"Consolidated Pre-Tax Income" means, for any period of computation thereof, the
gross revenues from operations of the Borrower and its Subsidiaries less all
operating and non-operating expenses of the Borrower and its Subsidiaries
excluding taxes on income, all determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles applied on a Consistent Basis; but
excluding as income: (i) net gains on the sale, conversion or other disposition
of capital assets, (ii)net gains on the acquisition, retirement, sale or other
disposition of capital stock and other securities of the Borrower or its
Subsidiaries, (iii) net gains on the collection of proceeds of life insurance
policies, (iv) any write-up of any asset, and (v) any other net gain or credit
of an extraordinary nature as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis;
"Consolidated Rental Expense" means and includes with respect to the period of
determination thereof, the aggregate amount of all fixed payments (including as
such all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the leased property) payable by the
Borrower or any of its Subsidiaries, as lessee or sublessee under any lease of
real or personal property and shall include any amounts required to be paid by
the Borrower or any of its Subsidiaries (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges;
"Consolidated Shareholders' Equity" means, at any time as of which the amount
thereof is to be determined, the consolidated shareholders' equity as determined
in accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis;
'Consolidated Total Assets' means, as of any date on which the amount thereof is
to be determined, the net book value of all assets of the Borrower and its
Subsidiaries as determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis;
"Contingent Obligation" of any Person means all contingent liabilities required
(or which, upon the creation or incurring thereof, would be required) to be
included in the consolidated financial statements of such Person in accordance
with Generally Accepted Accounting Principles applied on a Consistent Basis, as
defined by Statement No.5 of the Financial Accounting Standards Board, and any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including obligations
of such Person however incurred:
(1) to purchase such Indebtedness or other obligation or any property or
assets constituting security therefor;
(2) to advance or supply funds in any manner (i)for the purchase or
payment of such Indebtedness or other obligation, or (ii)to maintain a
minimum working capital, net worth or other balance sheet condition or any
income statement condition of the primary obligor;
(3) to grant or convey any lien, security interest, pledge, charge or other
encumbrance on any property or assets of such Person to secure payment of
such Indebtedness or other obligation;
(4) to lease property or to purchase securities or other property or
services primarily for the purpose of assuring the owner or holder of such
Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(5) otherwise to assure the owner of the Indebtedness or such obligation of
the primary obligor against loss in respect thereof;
with respect to Contingent Obligations, such liabilities shall be computed at
the amount which, in light of all the facts and circumstances existing at the
time, represent the present value of the amount which can reasonably be expected
to become an actual or matured liability;
'Continue', 'Continuation' and 'Continued' shall refer to the continuation
pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period;
'Convert', 'Conversion' and 'Converted' shall refer to a conversion pursuant to
Section 2.09 or Article IV of one Type of Loan into another Type of Loan;
"Cost of Acquisition" means, as at the date of entering into any agreement to
Acquire any Person, the sum of the following without duplication: (i) any cash
or other property or the face amount of any debt instrument given as
consideration; (ii) any Indebtedness or liabilities assumed by the Borrower or
its Subsidiaries in connection with such Acquisition, including accounts payable
and other current liabilities and (iii) all amounts paid or payable in respect
of covenants not to compete, consulting agreements (either of which are required
to be capitalized in accordance with Generally Accepted Accounting Principles)
and other related contracts in connection with such Acquisition; provided,
however, that the Cost of Acquisition shall not include the value of the capital
stock of the Borrower or any Subsidiary to be transferred in connection
therewith;
"Default" means any event or condition which, with the giving or receipt of
notice or lapse of time or both, would constitute an Event of Default hereunder;
"Default Rate" means (i) with respect to each Eurodollar Loan, until the end of
the Interest Period applicable thereto, a rate of two percent (2%) above the
Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest
per annum which shall be two percent (2%) above the Base Rate, (ii) with respect
to Base Rate Loans and Swing Line Loans, a rate of interest per annum which
shall be two percent (2%) above the Base Rate, (iii) with respect to each
Competitive Bid Loan, a rate of two percent (2%) above the Absolute Rate
applicable to such Loan, and (iv) in any case, the maximum rate permitted by
applicable law, if lower;
'Dollar Equivalent Amount' means, with respect to a specified Alternative
Currency amount, the amount of Dollars into which an Alternative Currency amount
would be converted, based on the applicable Advance Date Exchange Rate;
'Dollar Value' of an Advance or Loan in an Alternative Currency means the Dollar
Equivalent Amount of the principal amount of such Advance or Loan, as recorded
in the Agent's records pursuant to Section 2.01(b) and Section 3.01(b);
"Dollars" and the symbol "$" means dollars constituting legal tender for the
payment of public and private debts in the United States of America;
'Eligible Assignee' means (i) a Lender; (ii) an affiliate of a Lender; and (iii)
any other financial institution approved by the Agent, such approval not to be
unreasonably withheld, and, unless an Event of Default has occurred and is
continuing at the time any assignment is effected in accordance with Section
12.01, the Borrower, such approval not to be unreasonably withheld or delayed by
the Borrower or the Agent and such approval to be deemed given by the Borrower
if no objection is received by the assigning Lender and the Agent from the
Borrower within five Business Days after written notice of such proposed
assignment has been provided by the assigning Lender to the Borrower; provided,
however, that neither the Borrower nor an affiliate of the Borrower shall
qualify as an Eligible Assignee; and provided, further, that Borrower may
withhold its consent if by reason of an assignment Borrower will incur any
increased costs or withholding of taxes under Article IV;
"Eligible Securities" means the following obligations provided such securities
are authorized to be acquired under the Borrower's Cash Management Account
Investment Guidelines (the "Guidelines"):
(a) Government Securities;
(b) the following debt securities of the following agencies or
instrumentalities of the United States of America if at all times the full
faith and credit of the United States of America is pledged to the full and
timely payment of all interest and principal thereof:
(i) all direct or fully guaranteed obligations of the United States
Treasury; and
(ii) mortgage-backed securities and participation certificates
guaranteed by the Government National Mortgage Association;
(c) the following obligations of the following agencies or
instrumentalities of the United States of America:
(i) participation certificates and debt obligations of the Federal
Home Loan Mortgage Corporation;
(ii) consolidated debt obligations, and obligations secured by a
letter of credit, of the Federal Home Loan Banks; and
(iii) debt obligations and mortgage-backed securities of the Federal
National Mortgage Association which have not had the interest portion
thereof severed therefrom;
(d) obligations of any corporation organized under the laws of any state of
the United States of America or under the laws of any other nation, payable
in the United States of America, expressed to mature not later than 92 days
following the date of issuance thereof and rated in an investment grade
rating category by S&P and Moody's;
(e) interest bearing demand or time deposits issued by a Lender or
certificates of deposit maturing within one year from the date of
acquisition issued by a bank or trust company organized under the laws of
the United States or of any state thereof having capital surplus and
undivided profits aggregating at least $400,000,000 and being rated A- or
better by S&P or A-3 or better by Moody's;
(f) Repurchase Agreements;
(g) Pre-Refunded Municipal Obligations;
(h) shares of mutual funds which invest in obligations described in
paragraphs (a) through (g) above, the shares of which mutual funds are at
all times rated "AAA" by S&P;
(i) asset-backed remarketed certificates of participation representing a
fractional undivided interest in the assets of a trust, which certificates
are rated at least "A-1" by S&P and "P-1" by Moody's; and
(j) those securities which comply with the Borrower's Guidelines, so long
as the Agent shall have approved in writing such Guidelines.
Obligations listed in paragraphs (a), (b) and (c) above which are in
book-entry form must be held in a trust account with the Federal Reserve
Bank or with a clearing corporation or chain of clearing corporations which
has an account with the Federal Reserve Bank;
'EMU' means the European economic and monetary union;
"Environmental Laws" means any federal, state or local statute, law, ordinance,
code, rule, regulation, order, decree, permit or license regulating, relating
to, or imposing liability or standards of conduct concerning, any environmental
matters or conditions, environmental protection or conservation, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended; the Superfund Amendments and Reauthorization
Act of 1986, as amended; the Resource Conservation and Recovery Act, as amended;
the Toxic Substances Control Act, as amended; the Clean Air Act, as amended; the
Clean Water Act, as amended; together with all regulations promulgated
thereunder, and any other "Superfund" or "Superlien" law.
"ERISA" means, at any date, the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder, all as the same shall be in effect
at such date;
'Euro' means the lawful currency of the EMU;
"Euro Business Day" means a Business Day on which the relevant international
financial markets are open for the transaction of the business contemplated by
this Agreement in London, England and New York, New York;
'Eurodollar Loan' means a Loan for which the rate of interest is determined by
reference to the Eurodollar Rate;
"Eurodollar Rate" means, for the Interest Period for any Eurodollar Loan, the
rate of interest per annum determined pursuant to the following formula:
Eurodollar Interbank Offered Rate Applicable
Rate = 1-Eurodollar Reserve + Margin
Requirement
"Eurodollar Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against in the case of
Eurodollar Loans, Eurocurrency liabilities (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by reference
to which the Eurodollar Rate is to be determined, or (ii) any category of
extensions of credit or other assets which include Eurodollar Loans. The
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage;
"Event of Default" means any of the occurrences set forth as such in Section
10.01 hereof;
"Existing Letters of Credit" means those Letters of Credit issued by
NationsBank, which are outstanding on the Closing Date and which are described
in Schedule1.02 attached hereto;
'5 Year Commitment' means, with respect to each Lender, the obligation of such
Lender to make Advances to the Borrower up to an aggregate principal amount at
any one time outstanding equal to such Lenders Applicable Commitment Percentage
of the Total 5 Year Commitment;
'5 Year Facility' means the revolving credit facility providing for loans of up
to $350,000,000 to the Borrower described in Section 2.01(b);
'5 Year Loan' means a Loan or Advance made to the Borrower pursuant to the 5
Year Facility;
'5 Year Notes' means, collectively, the promissory notes of the Borrower
evidencing 5 Year Loans executed and delivered to the Lenders as provided in
Section 2.07(b) hereof substantially in the form attached hereto as Exhibit F-2,
with appropriate insertions as to amounts, dates and names of Lenders;
'5 Year Termination Date' means (i) Stated 5 Year Termination Date or (ii) such
earlier date of termination of Lenders obligations pursuant to Section 10.01
upon the occurrence of an Event of Default or (iii) such date as the Borrower
may voluntarily permanently terminate the 5 Year Facility (including the Swing
Line Facility) and the Competitive Bid Facility by payment in full of all
outstanding 5 Year Loans (including the discharge of all Obligations to the
Lenders and NationsBank with respect to Letters of Credit, Participations, Swing
Line Loans and Competitive Bid Loans);
"Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to the agent (in its
individual capacity) on such day on such transactions as determined by the
Agent;
"Fiscal Year" means the twelve month period of the Borrower beginning January 1
and ending December 31 of the same calendar year;
'Foreign Benefit Law' means any applicable statute, law, ordinance, code, rule,
regulation, order or decree of any foreign nation or any province, state,
territory, protectorate or other political subdivision thereof regulating,
relating to, or imposing liability or standards of conduct concerning any
pension, retirement, healthcare, death, disability or other employee benefit
plan;
"Four-Quarter Period" means a period of four full consecutive fiscal quarter
periods, taken together as one accounting period;
'Funding Bank' means any banking institution approved by the Agent located
within a country which countrys currency constitutes an Alternative Currency;
"Generally Accepted Accounting Principles" means those principles of accounting
set forth in pronouncements of the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances as of
the date of a report, as such principles are from time to time supplemented and
amended;
"Government Securities" means direct obligations of, or obligations the timely
payment of principal and interest on which are fully and unconditionally
guaranteed by, the United States of America;
"Governmental Authority" shall mean any Federal, state, municipal, national or
other governmental department, commission, board, bureau, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative or judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
of a state of the United States, the United States or a foreign governmental
entity;
"Guarantors" means each Material Subsidiary of the Borrower who shall deliver to
the Agent a Guaranty at the Closing Date and all Receivables Subsidiaries;
"Guaranty Agreement" means that certain Guaranty and Suretyship Agreement dated
as of even date hereof in favor of the Agent, for the benefit of the Lenders, as
the same may be amended, modified or supplemented;
"Hazardous Material" means and includes any pollutant, contaminant or hazardous,
toxic or dangerous waste, substance or material (including, without limitation
petroleum products, asbestos-containing material and lead), the generation,
handling, storage, disposal, treatment, release, discharge or emission of which
is subject to any Environmental Law;
"Indebtedness" means with respect to any Person, without duplication, all
Indebtedness for Money Borrowed, all indebtedness of such Person for the
acquisition of property, all indebtedness secured by any Lien on the property of
such Person whether or not such indebtedness is assumed, all liability of such
Person by way of endorsements (other than for collection or deposit in the
ordinary course of business), all Contingent Obligations, all letters of credit,
all Rate Hedging Obligations and other items which in accordance with Generally
Accepted Accounting Principles is classified as a liability on a balance sheet
other than accrued expenses and accrued taxes; but excluding all accounts
payable in the ordinary course of business so long as payment therefor is due
within one year; provided that in no event shall the term Indebtedness include
partners' capital, surplus and retained earnings, minority interest in Persons,
lease obligations (other than pursuant to Capital Leases), reserves for current
and deferred income taxes and investment credits, other deferred credits and
reserves, and deferred compensation obligations;
"Indebtedness for Money Borrowed" means all indebtedness in respect of money
borrowed, including without limitation all Capital Leases and the deferred
purchase price of any property or asset, evidenced by a promissory note, bond or
similar written obligation for the payment of money (including, but not limited
to, conditional sales or similar title retention agreements) and the undrawn
amount of all Letters of Credit;
"Interbank Offered Rate" means, with respect to any Eurodollar Loan, for the
Interest Period applicable thereto, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Dow Jones Telerate Page 3750
(or any successor page) as the London interbank offered rate for deposits in
Dollars or such other applicable page in the case of an Alternative Currency at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term Interbank Offered Rate shall
mean, for any Eurodollar Loan for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars or the Alternative Currency, as the case may be, at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100th of 1%);
"Interest Period" (a) for each Eurodollar Loan means a period commencing on the
date such Eurodollar Loan is made or Converted and each subsequent period
commencing on the last day of the immediately preceding Interest Period for such
Eurodollar Loan, and ending, at the Borrower's option, on the date one, two,
three or six months thereafter as notified to the Agent by the Authorized
Representative three (3) Business Days prior to the beginning of such Interest
Period in the case of a Eurodollar Loan in Dollars and four (4) Business Days in
the case of a Eurodollar Loan in an Alternative Currency; provided, that,
(i) if the Authorized Representative fails to notify the Agent of the
length of an Interest Period three (3) Business Days in the case of a
Eurodollar Loan in Dollars and four (4) Business Days in the case of a
Eurodollar Loan in an Alternative Currency prior to the first day of such
Interest Period, the Loan for which such Interest Period was to be
determined shall be deemed to be a Base Loan in Dollars as of the first day
thereof;
(ii) if an Interest Period for a Eurodollar Loan would end on a day which
is not a Business Day such Interest Period shall be extended to the next
Business Day (unless such extension would cause the applicable Interest
Period to end in the succeeding calendar month, in which case such Interest
Period shall end on the next preceding Business Day); and
(iii) on any day, with respect to all Revolving Credit Loans and
Competitive Bid Loans, there shall not be in effect more than seven (7)
Interest Periods;
(b) for each Competitive Bid Loan means the period commencing on the date
of such Loan and ending on such date as may be mutually agreed upon by the
Borrower and the Lender or Lenders making such Competitive Bid Loan or
Loans, as the case may be, comprising such Competitive Bid Loan; provided
that no Interest Period for a Competitive Bid Loan shall be for a period of
less than seven nor greater than 120 days;
'Interest Rate Selection Notice' means the telephonic or telefacsimile request
of an Authorized Representative to elect a subsequent Interest Period for or to
convert a Loan or Loans of any Type, as such election or conversion shall be
otherwise permitted herein. Any Interest Rate Selection Notice shall be binding
on and irrevocable by the Borrower and, if given by telephone, shall be
confirmed by facsimile transmission delivered to the Agent, or in the case of
Swing Line Loans, NationsBank, effective upon receipt, on the same Business Day
upon which the telephonic request is made, by the Authorized Representative in
the form attached hereto as Exhibit E and incorporated herein by reference;
"LC Account Agreement" means the LC Account Agreement dated as of the date
hereof between the Borrower and the Agent, as amended or modified from time to
time;
"Letter of Credit" means a standby letter of credit issued by NationsBank for
the account of the Borrower in favor of a Person advancing credit or securing an
obligation on behalf of the Borrower including the Existing Letters of Credit;
"Letter of Credit Facility" means the facility described in Article III hereof
providing for the issuance by NationsBank for the account of the Borrower of
Letters of Credit in an aggregate stated amount at any time outstanding not
exceeding the Total Letter of Credit Commitment;
"Letter of Credit Outstandings" means, as of any date of determination, the
aggregate amount remaining undrawn under all Letters of Credit plus
Reimbursement Obligations then outstanding;
"Lien" means any interest in property securing any obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes. For the purposes of this Agreement, the Borrower
and its Subsidiaries shall be deemed to be the owners of any property which any
of them have acquired or hold subject to a conditional sale agreement, financing
lease, or other arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security purposes;
"Loan" or "Loans" means any borrowing under the Revolving Credit Loans, Swing
Line Loans or Competitive Bid Loans;
"Loan Documents" means this Agreement, the Notes, the Guaranty Agreements, the
Applications and Agreements for Letters of Credit, the LC Account Agreement and
all other instruments and documents heretofore or hereafter executed or
delivered to and in favor of the Agent for the benefit of the Lenders in
connection with the Loans or the Letters of Credit made, issued or created under
this Agreement as the same may be amended, modified or supplemented from the
time to time;
'Loan Parties' means the Borrower and the Guarantors;
'Material Adverse Effect' means a material adverse effect on (i) the business,
properties, operations or condition, financial or otherwise, of the Borrower and
its Subsidiaries, taken as a whole, (ii) the ability of the Borrower to pay or
perform its obligations, liabilities and indebtedness under the Loan Documents
as such payment or performance becomes due in accordance with the terms thereof,
or (iii) the rights, powers and remedies of the Agent or any Lender under any
Loan Document or the validity, legality or enforceability thereof (including for
purposes of clauses (ii) and (iii) the imposition of burdensome conditions with
respect to such Loan Documents);
Material Subsidiary means those Subsidiaries of Borrower listed on Schedule
1.03 other than those indicated as inactive and to be liquidated;
"Moody's" means Moody's Investors Service, Inc., a Delaware corporation;
"Multi-employer Plan" means an employee pension benefit plan covered by Title IV
of ERISA and in respect of which the Borrower or any Subsidiary is an "employer"
as described in Section 4001(b) of ERISA, which is also a multi-employer plan as
defined in Section 4001(a)(3) of ERISA;
"Net Funded Indebtedness" means Consolidated Funded Indebtedness less cash and
Eligible Securities (other than those described in clause (j) which are not
otherwise permitted in clauses (a) through (i) of the definition of Eligible
Securities) having a maturity of less than one year aggregating in excess of
$25,000,000;
"Notes" means, collectively, the 5 Year Notes, the 364 Day Notes, the Swing Line
Note and the Competitive Bid Notes which are to be delivered to the Lenders;
"Obligations" means the obligations, liabilities and Indebtedness of the
Borrower with respect to (i)the principal and interest on the Loans as
evidenced by the Notes, (ii)the Reimbursement Obligations, (iii) all
liabilities of Borrower to the Lenders which arise under a Swap Agreement,
and (iv) the payment and performance of all other obligations, liabilities and
Indebtedness of the Borrower to the Lenders hereunder, under any one or more of
the other Loan Documents or with respect to the Loans;
'Outstanding 5 Year Obligations' means the sum of (i) the outstanding 5 Year
Loans, (ii) Outstanding Letters of Credit, (iii) Swing Line Outstandings and
(iv) outstanding Competitive Bid Loans, all as at the date of determination;
'Outstanding Letters of Credit' means all undrawn amounts of Letters of Credit
plus Reimbursement Obligations;
'Outstanding 364 Day Obligations' means the sum of all outstanding 364 Day Loans
as at the date of determination;
"Participation" means (i) with respect to any Lender (other than NationsBank)
and a Letter of Credit, the extension of credit represented by the participation
of such Lender hereunder in the liability of NationsBank in respect to a Letter
of Credit issued by NationsBank in accordance with the terms hereof and (ii)
with respect to any Lender (other than NationsBank) and a Swing Line Loan, the
extension of credit represented by the participation of such Lender hereunder in
the liability of NationsBank in respect of a Swing Line Loan made by NationsBank
in accordance with the terms hereof;
'Permitted Liens' means:
(a) Liens existing on the Closing Date set forth on Schedule 7.01(g);
(b) any Lien for taxes not yet due or taxes or assessments or other
governmental charges which are being actively contested in good faith by
appropriate proceedings;
(c) any Liens, pledges or deposits in connection with workers compensation
or social security, assessments or other similar charges or deposits
incidental to the conduct of the business of the Borrower or any Subsidiary
or the ownership of any of their properties which were not incurred in
connection with the borrowing of money or the obtaining of advances or
credit and which do not in the aggregate materially detract from the value
of their properties or materially impair the use thereof in the operation
of their businesses;
(d) any Lien existing on any properties of any corporation at the time it
becomes a Subsidiary, or existing prior to the time of acquisition upon any
properties acquired by the Borrower or any Subsidiary through purchase,
merger, consolidation or otherwise, whether or not assumed by the Borrower
or such Subsidiary;
(e) statutory Liens of carriers, warehousemen, mechanics, materialmen and
other Liens imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings;
(f) pledges or deposits for the purpose of securing a stay or discharge in
the course of any legal proceeding;
(g) Liens consisting of encumbrances in the nature of zoning restrictions,
easements, rights and restrictions of record on the use of real property on
the date of the acquisition thereof and statutory Liens of landlords and
lessors which in any case do not materially detract from the value of such
property or impair the use thereof;
(h) any Lien in favor of the United States of America or any department or
agency thereof, or in favor of any state government or political
subdivision thereof, or in favor of a prime contractor under a government
contract of the United States, or of any state government or any political
subdivision thereof, and, in each case, resulting from acceptance of
partial, progress, advance or other payments in the ordinary course of
business under government contracts of the United States, or of any state
government or any political subdivision thereof, or subcontracts
thereunder;
(i) any Lien renewing, extending, refinancing or refunding any Lien
permitted by clauses (a), (c), (d), (e), (f), (g) or (h) above; provided,
however, that the principal amount secured is not increased, and the Lien
is not extended to other properties.
"Person" means an individual, partnership, corporation, limited liability
company, trust, unincorporated organization, association, joint venture or a
government or agency or political subdivision thereof;
"Pre-Refunded Municipal Obligations" means obligations of any state of the
United States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated, based on the escrow,
in the highest investment rating category by both S&P and Moody's and which have
been irrevocably called for redemption and advance refunded through the deposit
in escrow of Government Securities or other debt securities which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii) irrevocably
pledged solely to the payment of all principal and interest on such obligations
as the same becomes due and (iii) in a principal amount and bear such rate or
rates of interest as shall be sufficient to pay in full all principal of,
interest, and premium, if any, on such obligations as the same becomes due as
verified by a nationally recognized firm of certified public accountants;
"Prime Rate" means the per annum rate of interest established from time to time
by NationsBank as its prime rate, which rate may not be the lowest rate of
interest charged by NationsBank to its customers;
"Principal Office" means the office of the Agent presently located at 101 North
Tryon Street, 15th Floor, Charlotte, North Carolina 28255, Attention: Agency
Services or such other office and address as the Agent may from time to time
designate in writing to the Borrower;
"Rate Hedging Obligations" means any and all obligations of the Borrower,
whether absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under (a) any and all agreements, devices
or arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts,
warrants and those commonly known as interest rate "swap" agreements; and (b)
any and all cancellations, buybacks, reversals, terminations or assignments of
any of the foregoing;
'Receivables Subsidiary' means a Subsidiary of the Borrower which principal
business is to acquire accounts receivable from the Borrower and/or its other
Subsidiaries;
"Regulation D" means RegulationD of the Board as the same may be amended or
supplemented from time to time;
"Reimbursement Obligation" shall mean at any time, the obligation of the
Borrower with respect to any Letter of Credit to reimburse NationsBank and the
Lenders to the extent of their respective Participations (including by the
receipt by NationsBank of proceeds of Loans pursuant to Section 2.01(d)(iv)) for
amounts theretofore paid by NationsBank pursuant to a drawing under such Letter
of Credit;
"Repurchase Agreement" means a repurchase agreement entered into with any
financial institution whose debt obligations or commercial paper are rated "A"
by either of S&P or Moody's or "A-1" by S&P or "P-1" by Moody's;
"Required Lenders" means, as of any date, Lenders on such date having Credit
Exposures (as defined below) aggregating at least 51% of the aggregate Credit
Exposures of all the Lenders on such date. For purposes of the preceding
sentence, the amount of the "Credit Exposure" of each Lender shall be equal at
all times to its Revolving Credit Commitment; provided that, if any Lender shall
have failed to pay (x) to NationsBank its Applicable Commitment Percentage of
any Swing Line Loan or (y) to NationsBank its Applicable Commitment Percentage
of any drawing under any Letter of Credit resulting in an outstanding
Reimbursement Obligation, such Lender's Credit Exposure attributable to Swing
Line Loans shall be deemed to be held by NationsBank for purposes of this
definition, and such Lender's Credit exposure attributable to Letters of Credit,
Reimbursement Obligations and the Letter of Credit Commitment shall be deemed to
be held by the applicable Issuing Bank for purposes of this definition;
'Restricted Payment' means (a) any dividend or other distribution, direct or
indirect, on account of any shares of any class of stock of Borrower or any of
its Subsidiaries (other than those payable or distributable solely to the
Borrower or a Subsidiary) now or hereafter outstanding, except a dividend
payable solely in shares of a class of stock to the holders of that class; (b)
any redemption, conversion, exchange, retirement or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock of the Borrower or any of its Subsidiaries (other than those payable or
distributable solely to the Borrower or a Subsidiary) now or hereafter
outstanding; (c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
stock of the Borrower or any of its Subsidiaries now or hereafter outstanding;
and (d) any issuance and sale of capital stock of any Subsidiary of the Borrower
(or any option, warrant or right to acquire such stock) other than to the
Borrower;
"Revolving Credit Commitment" means, with respect to each Lender, the obligation
of such Lender to make Advances to the Borrower up to an aggregate principal
amount at any one time outstanding equal to such Lender's Applicable Commitment
Percentage of the Total Revolving Credit Commitment;
"Revolving Credit Facilities" means the facilities described in Section 2.01(a)
and (b) hereof providing for Loans to the Borrower by the Lenders in the
aggregate principal amount of up to the Total Revolving Credit Commitment less
the aggregate amount of Total Outstanding Credit Obligations;
'Revolving Credit Loan' means a Loan made pursuant to either of the Revolving
Credit Facilities;
"S&P" means Standard & Poor's, a division of McGraw-Hill Companies;
"Single Employer Plan" means any employee pension benefit plan covered by Title
IV of ERISA and in respect of which the Borrower or any Subsidiary is an
"employer" as described in Section 4001(b) of ERISA, which is not a
Multi-employer Plan;
"Solvent" means, when used with respect to any Person, that at the time of
determination:
(i) the fair value of its assets is in excess of the total amount of its
liabilities, including, without limitation, Contingent Obligations; and
(ii) it is then able and expects to be able to pay its debts as they
mature; and
(iii) it has capital sufficient to carry on its business as conducted and
as proposed to be conducted;
'Spot Rate of Exchange' means , (i) in determining the Dollar Equivalent Amount
of a specified Alternative Currency amount as of any date, the spot exchange
rate determined by the Agent in accordance with its usual procedures for the
purchase by the Agent of Dollars with such Alternative Currency at approximately
10:00 A.M. on the Business Day that is two (2) Business Days prior to the date
of the Advance or Conversion, and (ii) in determining the Alternative Currency
Equivalent Amount of a specified Dollar amount on any date, the spot exchange
rate determined by the Agent in accordance with its usual procedures for the
purchase by the Agent of such Alternative Currency with Dollars at approximately
10:00 A.M. on the Business Day that is two (2) Business Days prior to the date
of the Advance or Conversion;
'Stated 5 Year Termination Date' means October 27, 2003;
'Strategix Subsidiaries' means any corporation or other entity in which more
than 50% of its outstanding voting stock or more than 50% of all equity interest
was owned directly or indirectly by the Borrower and which were sold to Randstad
US, L.P. pursuant to an Acquisition Agreement dated as of August 27, 1998 among
the Borrower, Randstad US, L.P. and Randstad Holding, n.v.;
"Subsidiary" means any corporation or other entity in which more than 50% of its
outstanding voting stock or more than 50% of all equity interests is owned
directly or indirectly by the Borrower and/or by one or more of the Borrower's
Subsidiaries;
"Swap Agreement" means one or more agreements with respect to Indebtedness
evidenced by the Notes between the Borrower and a Lender, on terms mutually
acceptable to such Borrower and such Lender, which agreements create Rate
Hedging Obligations;
"Swing Line" means the revolving line of credit established by NationsBank in
favor of the Borrower pursuant to Section 2.15;
"Swing Line Loans" means loans made by NationsBank to the Borrower pursuant to
Section 2.15;
'Swing Line Note' means the promissory note of the Borrower evidencing Swing
Line Loans executed and delivered to NationsBank as provided in Section 2.07(d)
hereof substantially in the form attached hereto as Exhibit F-4, with
appropriate insertions as to amounts, dates and names;
"Swing Line Outstandings" means, as of any date of determination, the aggregate
principal amount of all Swing Line Loans then outstanding;
'364 Day Commitment' means, with respect to each Lender, the obligation of such
Lender to make Advances to the Borrower up to an aggregate principal amount at
any one time outstanding equal to such Lenders Applicable Commitment Percentage
of the 364 Day Facility;
'364 Day Facility' means the revolving credit facility providing for Loans of up
to $150,000,000 to the Borrower described in Section 2.01(a);
'364 Day Extension Date' means October 27, 1999 and each date thereafter, if
any, to which the 364 Day Termination Date has been extended pursuant to Section
2.16, but in no event later than the 5 Year Termination Date;
'364 Day Loan' means a Loan or Advance made to the Borrower pursuant to a 364
Day Facility;
'364 Day Notes' means, collectively, the promissory notes of the Borrower
evidencing Loans executed and delivered to the Lenders as provided in Section
2.07(a) hereof substantially in the form attached hereto as Exhibit F-1, with
appropriate insertions as to amounts, dates and names of Lenders;
'364 Day Termination Date' means the earlier of (i) the 364 Day Extension Date
or (ii) the date of termination of Lenders obligations pursuant to Section
10.01 upon the occurrence of an Event of Default, or (iii) such date as the
Borrower may voluntarily permanently terminate the 364 Day Facility by payment
in full of all outstanding 364 Obligations, or (iv) the occurrence of the 5 Year
Termination Date;
'Total Alternative Currency Commitment' means an amount not to exceed
$50,000,000;
'Total 5 Year Commitment' means a principal amount equal to $350,000,000, as
reduced from time to time in accordance with Section 2.08;
"Total Letter of Credit Commitment" means an amount not to exceed $40,000,000;
'Total Outstanding Credit Obligations' means the sum of the Outstanding 5 Year
Obligations and the Outstanding 364 Day Obligations;
"Total Revolving Credit Commitment" means a principal amount equal to
$500,000,000, as reduced from time to time in accordance with Section 2.08;
'Total 364 Day Commitment' means a principal amount equal to $150,000,000, as
reduced from time to time in accordance with Section 2.08;
'Type' shall mean any type of Loan (i.e., a Base Loan or Eurodollar Loan);
"Unused Fee" means the fee payable by Borrower to the Agent for the benefit of
the Lenders pursuant to Section 2.12, such fee to be determined as set forth
under the definition of Applicable Margin;
'Year 2000 Compliant' means all computer applications (including those affected
by information received from its suppliers and vendors) that are material to the
Borrowers or any of its Subsidiaries business and operations will on a timely
basis be able to perform properly data-sensitive functions involving all dates
on and after January 1, 2000;
'Year 2000 Problem' means the risk that computer applications used by the
Borrower and any of its Subsidiaries (including those affected by information
received from its suppliers and vendors) may be unable to recognize and perform
properly data-sensitive functions involving certain dates on and after January
1, 2000.
1.02 Accounting Terms. All accounting terms not specifically defined herein
shall have the meanings assigned to such terms and shall be interpreted in
accordance with Generally Accepted Accounting Principles applied on a Consistent
Basis.
1.03 Cross References. Unless otherwise specified, references in this Agreement
and in each Loan Document to any Article or Section are references to such
Article or Section of this Agreement or such Loan Document, as the case may be,
and, unless otherwise specified, references in any Article, Section or
definition to any clause are references to such clause of such Section, Article
or definition.
1.04 Accounting and Financial Determinations. Where the character or amount of
any asset or liability or item of income or expense is required to be
determined, or any accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable, be made in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis except insofar as:
(a) the Borrower shall have elected (with the concurrence of its
independent public accountant and upon prior written notification to the
Lenders) to adopt more recently promulgated Generally Accepted Accounting
Principles (which election shall continue to be effective for subsequent
years); and
(b) the Agent and the Required Lenders shall have consented to such
election (it being understood that such consent may be conditioned upon the
implementation of such changes to Sections 8.01 and 8.02 as are appropriate
to reflect such adoption of more recently promulgated Generally Accepted
Accounting Principles and it being further understood that such consent
shall be deemed to have been given upon the implementation of such
changes).
Upon a change in Generally Accepted Accounting Principles which becomes
effective after the Closing Date which would have a material effect on the
Company's consolidated financial statements and the assets and liabilities
reflected therein or otherwise affect the calculation or the application of
the covenants contained in Article VIII hereof or the calculation of the
Applicable Margin, such change shall not be given effect for purposes
hereof until sixty (60) days from the otherwise effective date of such
change. Prior to such effectiveness the Agent, the Lenders and the Borrower
shall in good faith negotiate to amend the pertinent provisions of this
Agreement to account for such change to the extent appropriate to effect
the substance thereof as of the Closing Date. If such an amendment is not
entered into with respect to any such change, such change shall not be
given effect for purposes hereof.
1.05 General Provisions Relating to Definitions. Terms for which meanings are
defined in this Agreement shall apply equally to the singular and plural forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The term
"including" means including, without limiting the generality of any description
preceding such term. Each reference herein to any Person shall include a
reference to such Person's successors and permitted assigns. References to any
instrument defined in this Agreement refer to such instrument as originally
executed or, if subsequently varied, replaced or supplemented from time to time,
as so varied, replaced or supplemented and in effect at the relevant time of
reference thereto.
1.06 Time. Unless otherwise indicated, all references to time are to Charlotte,
North Carolina time.
<PAGE>
ARTICLE II
The Loans
2.01 Revolving Credit Facilities
(a) 364 Day Facility. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Advances to the Borrower, from time to time
from the Closing Date until the 364 Day Termination Date on a pro rata basis as
to the total borrowing requested by the Borrower under the 364 Day Facility on
any day determined by its Applicable Commitment Percentage up to but not
exceeding the 364 Day Commitment of such Lender, provided, however, that the
Lenders will not be required and shall have no obligation to make any Advance
(i) so long as a Default or an Event of Default has occurred and is continuing
or (ii) if the Agent, in accordance with the terms of this Agreement, has
accelerated the maturity of the Notes as a result of an Event of Default;
provided further, however, that immediately after giving effect to each Advance,
the principal amount of Outstanding 364 Day Obligations shall not exceed the
Total 364 Day Commitment. Within such limits, the Borrower may borrow, repay and
reborrow hereunder, on a Business Day from the Closing Date until, but (as to
borrowings and reborrowings) not including, the 364 Day Termination Date;
provided, however, that (x)no Eurodollar Loan shall be made which has an
Interest Period that extends beyond the 364 Day Termination Date and (y)each
Eurodollar Loan may, subject to the provisions of Section 2.09, be repaid only
on the last day of the Interest Period with respect thereto unless such payment
is accompanied by the additional payment, if any, required by Section 4.05. The
Borrower agrees that if at any time the Outstanding 364 Day Obligations shall
exceed the Total 364 Day Commitment, the Borrower shall immediately reduce the
outstanding principal amount of the 364 Day Loans such that, as a result of such
reduction, the Outstanding 364 Day Obligations shall not exceed the Total 364
Day Commitment.
(b) 5 Year Facility. Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make Advances in Dollars or an Alternative Currency
(as specified in the respective Borrowing Notice) to the Borrower under the 5
Year Facility from time to time from the Closing Date until the 5 Year Revolving
Credit Termination Date on a pro rata basis as to the total borrowing requested
by the Borrower on any day determined by such Lender's Applicable Commitment
Percentage up to but not exceeding a Dollar Value equal to the 5 Year Commitment
of such Lender, provided, however, that the Lenders will not be required and
shall have no obligation to make any such Advance (i) so long as a Default or an
Event of Default has occurred and is continuing or (ii) if the Agent has
accelerated the maturity of any of the Notes as a result of an Event of Default;
provided further, however, that immediately after giving effect to each such
Advance, the Dollar Value of the principal amount of Outstanding 5 Year
Obligations shall not exceed the Total 5 Year Commitment and the Dollar Value of
outstanding Advances in Alternative Currencies shall not exceed the Total
Alternative Currency Commitment. Within such limits, the Borrower may borrow,
repay and reborrow under the 5 Year Facility on a Business Day from the Closing
Date until, but (as to borrowings and reborrowings) not including, the 5 Year
Termination Date; provided, however, that (y)no Eurodollar Loan shall be made
which has an Interest Period that extends beyond the Stated 5 Year Termination
Date and (z)each Eurodollar Loan may, subject to the provisions of Section
2.09, be repaid only on the last day of the Interest Period with respect thereto
unless such payment is accompanied by the additional payment, if any, required
by Section 4.05. The Borrower agrees that if at any time the Outstanding 5 Year
Obligations shall exceed the Total 5 Year Commitment, the Borrower shall
immediately reduce the outstanding principal amount of the 5 Year Loans such
that, as a result of such reduction, the Outstanding 5 Year Obligations shall
not exceed the Total 5 Year Commitment.
(c) Amounts. (i) Each request for an Advance of an Alternative Currency under a
Borrowing Notice shall constitute the Borrowers request for a Loan of the
Dollar Value of the amount of the Alternative Currency specified in such
Borrowing Notice and for such Loan to be made available by the Lenders to the
Borrower in the Alternative Currency Equivalent Amount of such Dollar Value
(determined based on the Advance Date Exchange Rate applicable to such Advance).
The principal amount outstanding on any Loan shall be recorded in the Agents
records in Dollars (in the case of an Advance of an Alternative Currency as if
the Loan had initially been made in Dollars), based on the amount of any
Eurodollar Loan Advance and on the Dollar Value of the initial Advance of an
Alternative Currency, as reduced from time to time by the Dollar Equivalent
Amount (based on the Advance Date Exchange Rate applicable to such Advance) of
any principal payments with respect to such Advance. Advances in an Alternative
Currency shall be limited to Eurodollar Rate Loans. In the event a Eurodollar
Loan of an Alternative Currency is Continued, such election to Continue the
Eurodollar Loan shall be treated as an Advance and the Agent shall notify the
Borrower and the Lenders of the Advance Date Exchange Rate, Interest Period and
the Eurodollar Rate for such Continued Eurodollar Loan. The Lenders shall each
be deemed to have made an Advance to the Borrower of its Applicable Commitment
Percentage of such Loan of an Alternative Currency and the Agent shall apply the
Advance Date Exchange Rate for such new Interest Period to such Continued
Alternative Currency Equivalent Amount to determine the new Dollar Value of such
Eurodollar Loan and shall adjust its books and the Outstanding 5 Year
Obligations. In the event that such adjustment with respect to a Continued Loan
would cause either the total Dollar Value of Outstanding 5 Year Obligations to
exceed the Total 5 Year Commitment or the Dollar Value of such Continued
Alternative Currency Equivalent Amount to exceed the Total Alternative Currency
Commitment, the Borrower shall, immediately on the effective date of such
Continuation, repay (a Rate Adjustment Payment) the portion of such Continued
Loan (applying the new Advance Date Exchange Rate) necessary to ensure that the
total Dollar Value of all Outstanding 5 Year Obligations does not exceed the
Total 5 Year Commitment and that the Dollar Value of such Continued Alternative
Currency Equivalent Amount does not exceed the Total Alternative Currency
Commitment, provided, however, that the Borrower shall not be required to pay
any additional compensation pursuant to Section 4.02 with respect to a
prepayment of a Loan required by this sentence if such prepayment is made
immediately on the effective date of the Continuation giving rise to such
prepayment and no notice of such prepayment shall be required. For the purposes
of determining the maximum amount of Outstanding 5 Year Obligations hereunder,
it is intended by the parties that all Loans shall be the functional equivalent
of Loans made and repaid (based on the applicable Advance Date Exchange Rate for
each Advance) in Dollars. It is recognized that one or more Lenders may elect to
record Loans or Advances in Alternative Currencies. The Agent shall maintain
records sufficient to identify at any time, (A) the Advance Date Exchange Rate
with respect to each Advance, and (B) the portion of the Outstanding 5 Year
Obligations attributable to each Advance.
(ii) Except as otherwise permitted by the Lenders from time to time, the
aggregate unpaid principal amount (including with respect to Loans of
Alternative Currencies the total Dollar Value) of the Outstanding 5 Year
Obligations shall not exceed at any time the Total 5 Year Commitment, and,
in the event there shall be outstanding any such excess, the Borrower shall
immediately make such payments and prepayments as shall be necessary to
comply with this restriction. At no time shall the outstanding principal
amount of Swing Line Loans exceed $20,000,000. Each Loan hereunder, other
than Base Rate Refunding Loans and Swing Line Loans, and each Conversion
under Section 2.08, shall be (A) in the case of Loans made in Dollars, in
an amount of at least $5,000,000, and, if greater than $5,000,000, an
integral multiple of $1,000,000, and (B) in the case of Loans made in an
Alternative Currency, in an amount of at least $5,000,000 (or the
equivalent thereof in any Alternative Currency), and, if greater than
$5,000,000, an integral multiple of $1,000,000 (or the equivalent thereof
if in any Alternative Currency).
(d) Advances and Rate Selection. An Authorized Representative shall give the
Agent (A) at least three (3) Business Days' irrevocable written notice by
telefacsimile transmission of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate insertions, effective upon receipt, of
each Eurodollar Loan (whether representing an additional borrowing hereunder or
the Conversion of a borrowing hereunder) prior to 10:30 A.M., (B) at least four
(4) Business Days' irrevocable notice by telefacsimile transmission of a
Borrowing Notice or Interest Rate Selection Notice (as applicable) with
appropriate insertions, effective upon receipt, of each Alternative Currency
Loan (whether representing an additional borrowing hereunder or the Conversion
of a borrowing hereunder) prior to 10:30 A.M. and (C) irrevocable written notice
by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate insertions, effective upon receipt, of
each Revolving Credit Loan (other than Base Rate Refunding Loans to the extent
the same are effected without notice pursuant to Section 2.01(d)(iv)) that is a
Base Loan (whether representing an additional borrowing hereunder or the
Conversion of borrowing hereunder) prior to 10:30 A.M. on the day of such
proposed Base Loan. Each such notice shall specify the amount of the borrowing,
whether Dollar or Alternative Currency, the type of Loan (Base Rate or
Eurodollar Rate), the date of borrowing and, if a Eurodollar Loan, the Interest
Period to be used in the computation of interest. Notice of receipt of such
Borrowing Notice or Interest Rate Selection Notice, as the case may be, together
with the amount of each Lender's portion of an Advance requested thereunder,
shall be promptly provided by the Agent to each Lender by telefacsimile
transmission, but (provided the Agent shall have received such notice by 10:30
A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt of such
notice. At approximately 10:00 A.M. two (2) Business Days preceding the date
specified for an Advance of an Alternative Currency, the Agent shall determine
the Advance Date Exchange Rate and the applicable Eurodollar Rate. Not later
than 10:45 A.M. two (2) Business Days preceding the date specified for each
Advance of an Alternative Currency, the Agent shall provide the Borrower and
each Lender notice by telefacsimile transmission of the Advance Date Exchange
Rate applicable to such Advance, and the applicable Alternative Currency
Equivalent Amount of the Loan or Loans required to be made by each Lender on
such date, and the Dollar Value of such Loan or Loans and the applicable
Eurodollar Rate.
(ii) (A) In the case of Advances in Dollars, not later than 2:00 P.M. on
the date specified for each borrowing under this Section 2.01, each Lender
shall, pursuant to the terms and subject to the conditions of this
Agreement, make the amount of the Advance or Advances to be made by it on
such day available by wire transfer to the Agent in the amount of its pro
rata share, determined according to such Lender's Applicable Commitment
Percentage of the Revolving Credit Loan or Revolving Credit Loans to be
made on such day. Such wire transfer shall be directed to the Agent at the
Principal Office and shall be in the form of Dollars constituting
immediately available funds. The amount so received by the Agent shall,
subject to the terms and conditions of this Agreement, be made available to
the Borrower by delivery of the proceeds thereof to the Borrower's Account
or otherwise as shall be directed in the applicable Borrowing Notice by the
Authorized Representative and reasonably acceptable to the Agent.
(B) In the case of Advances of an Alternative Currency, not later than
10:00 A.M. on the date specified for each Advance, each Lender shall,
pursuant to the terms and subject to the conditions of this Agreement,
make the amount of the Loan or Loans to be made by it on such day
available to the Borrower at the Funding Bank, to the account of the
Agent with the Funding Bank. The amount so received by the Funding
Bank shall, subject to the terms and conditions of the Loan Documents
and upon instruction from the Agent to the Funding Bank on the same
day or immediately preceding day but no later than 10:00 A.M., be made
available to the Borrower by delivery of the Alternative Currency
Equivalent Amount to the Borrowers account with the Funding Bank.
(iii) The Borrower shall have the option to elect the duration of the
initial and any subsequent Interest Periods and to Convert the Loans in
accordance with Section 2.09. Eurodollar Loans and Base Loans may be
outstanding at the same time, provided, however, there shall not be
outstanding at any one time Eurodollar Loans having more than seven (7)
different Interest Periods. If the Agent does not receive a Borrowing
Notice or an Interest Rate Selection Notice giving notice of election of
the duration of an Interest Period or of Conversion of any Loan to or
Continuation of a Loan as a Eurodollar Loan by the time prescribed by
Section 2.01(c) or 2.09, the Borrower shall be deemed to have elected to
Convert such Loans to (or continue such Loan as) a Base Loan in Dollars
until the Borrower notifies the Agent in accordance with Section 2.09.
(iv) Notwithstanding the foregoing, if a drawing is made under any Letter
of Credit, such drawing is honored by NationsBank prior to the Stated 5
Year Termination Date, and the Borrower shall not immediately fully
reimburse NationsBank in respect of such drawing, (A) provided that the
conditions to making a 5 Year Loan as herein provided shall then be
satisfied, the Reimbursement Obligation arising from such drawing shall be
paid to NationsBank by the Agent without the requirement of notice to or
from the Borrower from immediately available funds which shall be advanced
as a Base Rate Refunding Loan by each Lender under the 5 Year Facility in
an amount equal to such Lenders Applicable Commitment Percentage of such
Reimbursement Obligation, and (B) if the conditions to making a 5 Year Loan
as herein provided shall not then be satisfied, each of the Lenders shall
fund by payment to the Agent (for the benefit of NationsBank) in
immediately available funds the purchase from NationsBank of their
respective Participations in the related Reimbursement Obligation based on
their respective Applicable Commitment Percentages of the Total Letter of
Credit Commitment. If a drawing is presented under any Letter of Credit in
accordance with the terms thereof and the Borrower shall not immediately
reimburse NationsBank in respect thereof, then notice of such drawing or
payment shall be provided promptly by NationsBank to the Agent and the
Agent shall promptly provide notice to each Lender by telephone or
telefacsimile transmission. If notice to the Lenders of a drawing under any
Letter of Credit is given by the Agent at or before 12:00 noon on any
Business Day, each Lender shall, pursuant to the conditions specified in
this Section 2.01(d)(iv), either make a Base Rate Refunding Loan or fund
the purchase of its Participation in the amount of such Lender's Applicable
Commitment Percentage of such drawing or payment and shall pay such amount
to the Agent for the account of NationsBank at the Principal Office in
Dollars and in immediately available funds before 2:30 P.M. on the same
Business Day. If notice to the Lenders of a drawing under a Letter of
Credit is given by the Agent after 12:00 noon on any Business Day, each
Lender shall, pursuant to the conditions specified in this Section
2.01(d)(iv), either make a Base Rate Refunding Loan or fund the purchase of
its Participation in the amount of such Lender's Applicable Commitment
Percentage of such drawing or payment and shall pay such amount to the
Agent for the account of NationsBank at the Principal Office in Dollars and
in immediately available funds before 12:00 noon on the next following
Business Day. Any such Base Rate Refunding Loan shall be advanced as, and
shall continue as, a Base Loan unless and until the Borrower Converts such
Base Loan in accordance with the terms of Section 2.09.
2.02 Competitive Bid Loans
(a) In addition to Revolving Credit Loans, at any time prior to the 5 Year
Termination Date and provided no Default or Event of Default exists hereunder,
the Borrower may, as set forth in this Section 2.02, request the Lenders to make
offers to make Competitive Bid Loans under the 5 Year Facility to the Borrower
in Dollars. The Lenders may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section 2.02. Competitive Bid Loans shall bear
interest at the Absolute Rate. There may be no more than seven (7) different
Interest Periods, for both Revolving Credit Loans and Competitive Bid Loans
outstanding at the same time (for which purpose Interest Periods for each
Revolving Credit Loan and each Competitive Bid Loan shall be deemed to be
different Interest Periods even if they are coterminous). The aggregate
principal amount of all outstanding Competitive Bid Loans, together with the sum
of all other Outstanding 5 Year Obligations, shall not exceed the Total 5 Year
Commitment at any time. The aggregate principal amount of all outstanding
Competitive Bid Loans shall not exceed one hundred percent (100%) of the Total 5
Year Commitment at any time. No Competitive Bid Loan shall have a maturity date
subsequent to the 5 Year Termination Date. The aggregate outstanding principal
amount of Competitive Bid Loans of any Lender shall not at any time exceed such
Lenders 5 Year Commitment.
(b) When the Borrower wishes to request offers to make Competitive Bid Loans, it
shall give the Agent (which shall promptly notify the Lenders) notice (a
"Competitive Bid Quote Request") to be received no later than 11:00 a.m. on the
fourth Business Day next preceding the date of borrowing proposed therein (or
such other time and date as the Borrower and the Agent, with the consent of the
Required Lenders, may agree). The Borrower may request the Agent to issue offers
to make Competitive Bid Loans for up to two (2) different Interest Periods in a
single notice; provided that the request for each separate Interest Period shall
be deemed to be a separate Competitive Bid Quote Request for a separate
borrowing (a "Competitive Bid Borrowing") and there shall not be outstanding at
any one time more than four (4) Competitive Bid Borrowings. Each such
Competitive Bid Quote Request shall be substantially in the form of ExhibitH
attached hereto and incorporated herein by reference and shall specify as to
each Competitive Bid Borrowing:
(i) the proposed date of such borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Competitive Bid Borrowing, which shall be
at least $10,000,000 (or in increments of $1,000,000 in excess thereof) but
shall not cause the limits specified in Section 2.02(a) hereof to be
violated;
(iii) the duration of the Interest Period applicable thereto; and
(iv) the date on which the Competitive Bid Quotes are to be submitted if it
is before the proposed date of borrowing (the date on which such
Competitive Bid Quotes are to be submitted is called the "Quotation Date").
Except as otherwise provided in this Section 2.02(b), no more than two (2)
Competitive Bid Quote Requests shall be given within five (5) Business Days
(or such other number of days as the Borrower and the Agent, with the
consent of the Required Lenders, may agree) of any other Competitive Bid
Quote Request. Together with each Competitive Bid Quote Request which the
Borrower requires the Agent to issue pursuant to this Section 2.02(b), the
Borrower shall pay to the Agent for the account of the Agent a bid
administration fee of $1,500.00 per Competitive Bid Borrowing.
(c) (i) Each Lender may submit one or more Competitive Bid Quotes, each
containing an offer to make a Competitive Bid Loan in response to any
Competitive Bid Quote Request; provided that, if the Borrowers request under
Section 2.02(b) hereof specified more than one Interest Period, such Lender may
make a single submission containing one or more Competitive Bid Quotes for each
such Interest Period. Each Competitive Bid Quote must be submitted to the Agent
not later than 9:30 a.m. on the Quotation Date (or such other time and date as
the Borrower and the Agent, with the consent of the Required Lenders, may agree)
provided that any Competitive Bid Quote may be submitted by the Agent (or its
Applicable Lending Office) only if the Agent (or such Applicable Lending Office)
notifies the Borrower of the terms of the offer contained therein not later than
9:15 a.m. on the Quotation Date. Subject to Articles IV, VI and X hereof, any
Competitive Bid Quote so made shall be irrevocable except with the consent of
the Agent given on the written instructions of the Borrower.
(ii) Each Competitive Bid Quote shall be substantially in the form of
Exhibit G attached hereto and incorporated herein by reference and shall
specify:
(A) the proposed date of borrowing and the Interest Period therefor;
(B) the principal amount of the Competitive Bid Loan for which each
such offer is being made, which principal amount shall be at least
$5,000,000 (or in increments of $1,000,000 in excess thereof);
provided that the aggregate principal amount of all Competitive Bid
Loans for which a Lender submits Competitive Bid Quotes (x) may not
exceed the 5 Year Commitment of such Lender and (y) may not exceed the
principal amount of the Competitive Bid Borrowing for a particular
Interest Period for which offers were requested;
(C) the rate of interest per annum (rounded upwards, if necessary, to
the nearest 1/10,000th of 1%) offered for each such Competitive Bid
Loan (the "Absolute Rate"); and
(D) the identity of the quoting Lender.
Unless otherwise agreed by the Agent and the Borrower, no Competitive
Bid Quote shall contain qualifying, conditional or similar language or
propose terms other than or in addition to those set forth in the
applicable Competitive Bid Quote Request and, in particular, no
Competitive Bid Quote may be conditioned upon acceptance by the
Borrower of all (or some specified minimum) of the principal amount of
the Competitive Bid Loan for which such Competitive Bid Quote is being
made.
(d) The Agent shall, as promptly as practicable after the Competitive Bid Quote
is submitted (but in any event not later than 10:30 A.M. Charlotte, North
Carolina time on the Quotation Date or such other time and date as the Borrower
and the Agent, with the consent of the Required Lenders, may agree), notify the
Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender
that is in accordance with Section 2.02(c) hereof and (ii) of any Competitive
Bid Quote that amends, modifies or is otherwise inconsistent with a previous
Competitive Bid Quote submitted by such Lender with respect to the same
Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall
be disregarded by the Agent unless such subsequent Competitive Bid Quote is
submitted solely to correct a manifest error in such former Competitive Bid
Quote. The Agents notice to the Borrower shall specify (A) the aggregate
principal amount of the Competitive Bid Borrowing for which orders have been
received and (B) the respective principal amounts and Absolute Rates so offered
by each Lender (identifying the Lender that made each Competitive Bid Quote).
(e) Not later than 11:00 A.M. on the Quotation Date (or such other time and date
as the Borrower and the Agent, with the consent of the Required Lenders, may
agree), the Borrower shall notify the Agent of its acceptance or nonacceptance
of the offers so notified to it pursuant to Section 2.02(d) hereof (and the
failure of the Borrower to give such notice by such time shall constitute
nonacceptance) and the Agent shall promptly notify each affected Lender. In the
case of acceptance, such notice shall specify the aggregate principal amount of
offers for each Interest Period that are accepted. The Borrower may accept any
Competitive Bid Quote in whole or in part (provided that any Competitive Bid
Quote accepted in part shall be at least $5,000,000 or in increments of
$1,000,000 in excess thereof); provided that:
(i) the aggregate principal amount of each Competitive Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive Bid
Quote Request;
(ii) the aggregate principal amount of each Competitive Bid Borrowing shall
be at least $5,000,000 (or an increment of $1,000,000 in excess thereof)
but shall not cause the limits specified in Section2.02(a) hereof to be
violated;
(iii) except as provided below, acceptance of Competitive Bid Quotes for
any Interest Period may be made only in ascending order of Absolute Rates,
beginning with the lowest rate so offered; and
(iv) the Borrower may not accept any Competitive Bid Quote where such
Competitive Bid Quote fails to comply with Section 2.02(c)(ii) hereof or
otherwise fails to comply with the requirements of this Agreement
(including, without limitation, Section 2.02(a) hereof).
Any of the conditions above notwithstanding, the Borrower may, in its sole
discretion, accept a Competitive Bid Quote that does not contain the lowest
Absolute Rate where acceptance of the Competitive Bid Quote containing the
lowest Absolute Rate would cause the Outstanding 5 Year Obligations owing
to a Lender or Lenders offering the lowest Absolute Rate to exceed the
Total 5 Year Commitment.
If Competitive Bid Quotes are made by two or more Lenders with the same
Absolute Rates for a greater aggregate principal amount than the amount in
respect of which Competitive Bid Quotes are accepted for the related
Interest Period after the acceptance of all Competitive Bid Quotes, if any,
of all lower Absolute Rates offered by any Lender for such related Interest
Period, the principal amount of Competitive Bid Loans in respect of which
such Competitive Bid Quotes are accepted shall be allocated by the Borrower
among such Lenders as nearly as possible (in amounts of at least $1,000,000
or in increments of $100,000 in excess thereof) in proportion to the
aggregate principal amount of such Competitive Bid Quotes. Determinations
by the Borrower of the amounts of Competitive Bid Loans and the lowest bid
after adjustment as provided in Section 2.02(e)(iii) shall be conclusive in
the absence of manifest error.
(f) Any Lender whose offer to make any Competitive Bid Loan has been accepted
shall, not later than 1:00 p.m. on the date specified for the making of such
Loan, make the amount of such Loan available to the Agent at the Principal
Office in Dollars and in immediately available funds, for account of the
Borrower. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower on such date by
depositing the same, in Dollars and in immediately available funds, in the
Borrowers Account.
2.03 Payment of Interest. (a) The Borrower shall pay interest (i) to the Agent
at the Principal Office for the account of each Lender on the outstanding and
unpaid principal amount of each Revolving Credit Loan made by such Lender in
Dollars for the period commencing on the date of such Loan until such Loan shall
be due at the Eurodollar Rate or the Base Rate, as elected or deemed elected by
the Borrower or otherwise applicable to such Loan as herein provided, (ii) to
the Agent at the Principal Office for the account of each Lender on the
outstanding and unpaid principal amount of each Revolving Credit Loan made by
such Lender in an Alternative Currency, such payment to be made in the
Alternative Currency, (iii) to the Agent at the Principal Office for the account
of the Lender making a Competitive Bid Loan, at the Absolute Rate, and (iv) to
the Agent in the case of each Swing Line Loan, at the Adjusted CD Rate;
provided, however, that if any amount shall not be paid when due (at maturity,
by acceleration or otherwise), all amounts outstanding hereunder shall bear
interest thereafter at the Default Rate from the date such amount was due and
payable until the date such amount is paid in full.
(b) Interest on each Revolving Credit Loan, Competitive Bid Loan and Swing
Line Loan shall be computed on the basis of a year of 360 days and
calculated for the actual number of days elapsed. Interest on each
Revolving Credit Loan and Competitive Bid Loan shall be paid (i)quarterly
in arrears on the last Business Day of each March, June, September and
December, commencing December 31, 1998, for each Base Loan and Swing Line
Loan, (ii) on the last day of the applicable Interest Period for each
Eurodollar Loan and, if such Interest Period extends for more than three
(3) months, at intervals of three (3) months after the first day of such
Interest Period, and (iii) upon the 5 Year Termination Date in the case of
5 Year Loans and the 364 Day Termination Date in the case of 364 Day Loans.
Interest payable at the Default Rate shall be payable on demand.
2.04 Payment of Principal. The principal amount of the Outstanding 364 Day
Obligations and Outstanding 5 Year Obligations shall be due and payable to the
Agent for the benefit of each Lender in full on the 364 Day Termination Date in
the case of 364 Day Loans and the 5 Year Termination Date in the case of 5 Year
Loans, or earlier as specifically provided herein. Such principal amount shall
be recorded in Dollars as set forth in Section 2.01. The principal amount of all
Competitive Bid Loans shall be due and payable to the Agent for the benefit of
the Lender making such Competitive Bid Loans in full on the last day of the
Interest Period therefor, or earlier as herein expressly provided. The repayment
of such principal amount of Alternative Currency Loans shall be made in the
appropriate Alternative Currency as follows: the portion of the Outstanding 5
Year Loans attributable to each specified Advance (or the Continuation or
Conversion thereof) (as determined from the Agents records) shall be repaid in
the same Alternative Currency and in the same amount as such Advance. The
principal amount of any Base Loan may be prepaid in Dollars in whole or in part
at any time. The principal amount of any Eurodollar Loan may be prepaid only at
the end of the applicable Interest Period unless the Borrower shall pay to the
Agent for the account of the Lenders the additional amount, if any, required
under Section 4.02. All prepayments of Revolving Credit Loans made by the
Borrower shall be in the amount of $5,000,000 (or the equivalent thereof in any
Alternative Currency) or such greater amount which is an integral multiple of
$1,000,000 (or the equivalent thereof in any Alternative Currency), or the
amount equal to all outstanding 364 Day Loans or 5 Year Loans, as the case may
be, or such other amount as necessary to comply with Section 2.01(b) or Section
2.08.
2.05 Non-Conforming Payments. Each payment of principal (including any
prepayment) and payment of interest and fees, and any other amount required to
be paid to the Lenders with respect to the Revolving Credit Loans, shall be made
to the Agent at the Principal Office, for the account of each Lender, in Dollars
in the case Loans made in Dollars and in the same Alternative Currency in the
case of Loans made in Alternative Currencies, in immediately available funds
before 12:30 P.M. on the date such payment is due. The Borrower shall give the
Agent one (1) Business Days prior written notice of any payment of principal,
such notice to be given prior to 10:00 A.M. and to specify (i) the date the
payment will be made and (ii) the Loan to which payment relates. The Agent may,
at the election of the Borrower, but shall not be obligated to, debit the amount
of any such payment which is not made by such time to any ordinary deposit
account, if any, of the Borrower with the Agent.
(b) The Agent shall deem any payment made by or on behalf of the Borrower
hereunder that is not made both (i) in Dollars in the case of Loans made in
Dollars and in the required Alternative Currency in the case of Loans made
in Alternative Currencies in immediately available funds and (ii) prior to
12:30 P.M. on the date payment is due to be a non-conforming payment. Any
such payment shall not be deemed to be received by the Agent until the
later of (i)the time such funds become available funds and (ii)the next
Business Day. Any non-conforming payment may constitute or become a Default
or Event of Default at the determination of the Agent. The Agent shall give
prompt telephonic or telefacsimile notice to the Borrower if a
non-conforming payment constitutes a Default or an Event of Default.
Interest shall continue to accrue on any principal as to which a
non-conforming payment is made until the later of (x) the date such funds
become available funds or (y) the next Business Day at the Default Rate
from the date such amount was due and payable.
(c) In the event that any payment hereunder or under the Notes becomes due
and payable on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day unless provided otherwise
under clause (ii) of the definition of "Interest Period"; provided that
interest shall continue to accrue during the period of any such extension
and provided further, that in no event shall any such due date be extended
beyond the Revolving Credit Termination Date.
2.06 Borrower's Account. The Borrower shall continuously maintain the Borrower's
Account for the purposes herein contemplated.
2.07 Notes. (a) 364 Day Loans made by each Lender, shall be evidenced by, and be
repayable with interest in accordance with the terms of, the 364 Day Note
payable to the order of such Lender in the amount of its Applicable Commitment
Percentage of the Total 364 Day Commitment, which 364 Day Note shall be dated
the Closing Date or such later date pursuant to an Assignment and Acceptance and
shall be duly completed, executed and delivered by the Borrower.
(b) 5 Year Loans made by each Lender shall be evidenced by, and be
repayable with interest in accordance with the term of, the 5 Year Note
payable to the order of such Lender in the amount of its Applicable
Commitment Percentage of the Total 5 Year Commitment, which 5 Year Note
shall be dated the Closing Date or such later date pursuant to an
Assignment and Acceptance and shall be duly completed, executed and
delivered by the Borrower.
(c) Competitive Bid Loans made by any Lender shall be evidenced by, and be
repayable with interest in accordance with the terms of, the Competitive
Bid Note payable to the order of such Lender in the amount of such Lenders
5 Year Commitment (but the aggregate outstanding principal amount of
Competitive Bid Loans may not at any time exceed one hundred percent (100%)
of the Total 5 Year Commitment) which shall be dated the Closing Date or
such later date pursuant to an Assignment and Acceptance and shall be duly
completed, executed and delivered by the Borrower.
(d) Swing Line Loans made by NationsBank shall be evidenced by the Swing
Line Note in the principal amount of $20,000,000, and shall be repayable
with interest in accordance with the terms of the Swing Line Note dated the
Closing Date and duly executed and delivered by the Borrower.
2.08 Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time, upon not less than two (2)
Business Days' written notice to the Agent to reduce either the Total 364 Day
Commitment or the Total 5 Year Commitment, or both, without penalty or premium
(other than amounts, if any, payable under Section 4.05). Each such reduction
shall be in the aggregate amount of $1,000,000 or such greater amount which is
in an integral multiple of $1,000,000, or the entire remaining Total 364 Day
Commitment or Total 5 Year Commitment, as the case may be, and shall permanently
reduce the Total 364 Day Commitment or the Total 5 Year Commitment; provided,
that a reduction made pursuant to Section 9.05 shall be in the amount of the net
proceeds received by the Borrower or its Subsidiaries, such payment to be
applied to permanently reduce the 5 Year Facility first. No such reduction shall
result in the payment of any Eurodollar Loan other than on the last day of the
Interest Period of such Loan unless such prepayment is accompanied by amounts
due, if any, under Section 4.05. Each reduction of the Total 364 Day Commitment
shall be accompanied by payment of the Loans to the extent that the sum of the
Outstanding 364 Day Obligations exceed the Total 364 Day Commitment and each
reduction of the Total 5 Year Commitment shall be accompanied by payment of the
5 Year Loans to the extent the sum of the Outstanding 5 Year Obligations exceed
the Total 5 Year Commitment, after giving effect to such reduction, together
with accrued and unpaid interest on the amounts prepaid.
2.09 Conversions and Elections of Subsequent Interest Periods. Subject to the
limitations set forth below and in Article IV hereof, the Borrower may:
(a) upon delivery, effective upon receipt, of a properly completed Interest
Rate Selection Notice to the Agent on or before 10:30 A.M. time on any
Business Day, Convert all or a part of Eurodollar Loans to Base Loans on
the last day of the Interest Period for such Eurodollar Loans; and
(b) provided that no Default or Event of Default shall have occurred and be
continuing upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three
(3) Business Days' prior to the date of such election or Conversion:
(i) elect a subsequent Interest Period for all or a portion of
Eurodollar Loans to begin on the last day of the then current Interest
Period for such Eurodollar Loans; and
(ii) Convert Base Loans to Eurodollar Loans on any Business Day.
Each election and Conversion pursuant to this Section 2.09 shall be subject
to the limitations on Eurodollar Loans set forth in the definition of
"Interest Period" herein and in Sections 2.01, 2.02 and Article IV. The
Agent shall give written notice to each Lender of such notice of election
or Conversion prior to 2:00 P.M. on the day such notice of election or
Conversion is received. All such Continuations or Conversions of Loans
shall be effected pro rata based on the Applicable Commitment Percentages
of the Lenders.
2.10 Increase and Decrease in Amounts. The amount of the Total 5 Year Commitment
which shall be available to the Borrower shall be reduced by the aggregate
amount of all Letter of Credit Outstandings, all Swing Line Outstandings and all
outstanding Competitive Bid Loans.
2.11 Pro Rata Payments. Except as otherwise provided herein, (a)each payment
and prepayment on account of the principal of and interest on the Loans (other
than Competitive Bid Loans and Swing Line Loans) and the fees described in
Section 2.12 hereof shall be made to the Agent in the aggregate amount payable
to the Lenders for the account of the Lenders pro rata based on their Applicable
Commitment Percentages, (b) each payment of principal and interest on the
Competitive Bid Loans shall be made to the Agent for the account of the Lender
making such Competitive Bid Loan, (c) each payment of principal and interest on
Swing Line Loans shall be made to the Agent for the account of NationsBank, (d)
all payments to be made by the Borrower for the account of each of the Lenders
on account of principal, interest and fees, shall be made without set-off or
counterclaim, and (e) the Agent will distribute such payments when received to
the Lenders as provided for herein.
2.12 Unused Fee. For the period beginning on the Closing Date and ending on the
364 Day Termination Date (or such earlier date on which the 364 Day Facility has
terminated), the Borrower agrees to pay to the Agent, for the pro rata benefit
of the Lenders based on their Applicable Commitment Percentages an Unused Fee
equal to the Applicable Margin per annum for the 364 Day Facility times the sum
of the daily amount by which the Total 364 Day Commitment exceeds the sum of the
average daily Outstanding 364 Day Obligations. For the period beginning on the
Closing Date and ending on the 5 Year Termination Date (or such earlier date on
which the 5 Year Facility has terminated), the Borrower agrees to pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages an Unused Fee equal to the Applicable Margin per annum
for the 5 Year Facility times the sum of the daily amount by which the Total 5
Year Commitment exceeds the sum of the average daily Outstanding 5 Year
Obligations (which do not include Swing Line Outstandings in the case of Lenders
and outstanding Competitive Bid Loans). Such payments of fees provided for in
this Section shall be due in arrears on the last Business Day of each March,
June, September and December beginning December 31, 1998 to and on the 364 Day
Termination Date in the case of the 364 Day Facility and 5 Year Termination Date
in the case of the 5 Year Facility (or such earlier date on which such Facility
has terminated). Notwithstanding the foregoing, so long as any Lender fails to
make available any portion of its 364 Day Commitment or 5 Year Commitment when
requested, such Lender shall not be entitled to receive payment of its pro rata
share of such fees until such Lender shall make available such portion. Such fee
shall be calculated on the basis of a year of 360 days for the actual number of
days elapsed.
2.13 Deficiency Avances. No Lender shall be responsible for any default of any
other Lender in respect to such other Lender's obligation to make any Loan or
fund its purchase of any Participation hereunder nor shall the 364 Day
Commitment or 5 Year Commitment of any Lender hereunder be increased as a result
of such default of any other Lender. Without limiting the generality of the
foregoing, in the event any Lender shall fail to advance funds to the Borrower
as herein provided, the Agent may in its discretion, but shall not be obligated
to, advance under the Note in its favor as a Lender evidencing Revolving Credit
Loans all or any portion of such amount or amounts (each, a "deficiency
advance") and shall thereafter be entitled to payments of principal of and
interest on such deficiency advance in the same manner and at the same interest
rate or rates to which such other Lender would have been entitled had it made
such advance under its Note; provided that, upon payment to the Agent from such
other Lender of the entire outstanding amount of each such deficiency advance,
together with accrued and unpaid interest thereon, from the most recent date or
dates interest was paid to the Agent by the Borrower on each Loan comprising the
deficiency advance at the interest rate per annum for overnight borrowing by the
Agent from the Federal Reserve Bank, then such payment shall be credited against
the Note of the Agent evidencing Revolving Credit Loans in full payment of such
deficiency advance and the Borrower shall be deemed to have borrowed the amount
of such deficiency advance from such other Lender as of the most recent date or
dates, as the case may be, upon which any payments of interest were made by the
Borrower thereon. Nothing contained in the foregoing shall be construed in any
way to limit the ability of any Loan Party from pursuing whatever legal remedy
it may have as a result of a Lenders failure to fund its portion of a Loan.
2.14 Use of Proceeds. The proceeds of the Loans made pursuant to the Revolving
Credit Facilities hereunder shall be used by the Borrower for working capital,
capital expenditures and other lawful general corporate purposes including
Acquisitions to the extent permitted herein.
2.15 Swing Line. (a) Notwithstanding any other provision of this Agreement to
the contrary, in order to administer the 5 Year Facility in an efficient manner
and to minimize the transfer of funds between the Agent and the Lenders,
NationsBank shall make available Swing Line Loans in Dollars to the Borrower
prior to the 5 Year Termination Date. NationsBank shall not make any Swing Line
Loan pursuant hereto (i) if, to the actual knowledge of NationsBank, the
Borrower is not in compliance with all the conditions to the making of Loans set
forth in this Agreement, (ii) if after giving effect to such Swing Line Loan,
the Swing Line Outstandings exceed $20,000,000, or (iii) if after giving effect
to such Swing Line Loan, the Outstanding 5 Year Obligations exceed the Total 5
Year Commitment. Swing Line Loans shall be limited to Loans bearing interest at
the Adjusted CD Rate. The Borrower may borrow, repay and reborrow under this
Section 2.15. Unless notified to the contrary by NationsBank, borrowings under
the Swing Line shall be made in the minimum amount of $500,000 or, if greater,
in amounts which are integral multiples of $50,000, or in the amount necessary
to effect a Base Rate Refunding Loan, upon written request by telefacsimile
transmission, effective upon receipt, by an Authorized Representative of the
Borrower made to NationsBank not later than 12:30 P.M. on the Business Day of
the requested borrowing. Each such Borrowing Notice shall specify the amount of
the borrowing and the date of borrowing, and shall be in the form of Exhibit
D-2, with appropriate insertions. Unless notified to the contrary by
NationsBank, each repayment of a Swing Line Loan shall be in an amount which is
an integral multiple of $50,000 or the aggregate amount of all Swing Line
Outstandings. If the Borrower instructs NationsBank to debit any demand deposit
account of the Borrower in the amount of any payment with respect to a Swing
Line Loan, or NationsBank otherwise receives repayment, after 2:00 P.M. on a
Business Day, such payment shall be deemed received on the next Business Day.
(b) Swing Line Loans shall bear interest at the Adjusted CD Rate, the
interest payable on Swing Line Loans is solely for the account of
NationsBank, and all accrued and unpaid interest on Swing Line Loans shall
be payable on the dates and in the manner provided in Sections 2.01(c) and
2.03 with respect to interest on Base Loans. The Swing Line Outstandings
shall be evidenced by the Note delivered to NationsBank pursuant to Section
2.07(d).
(c) Upon the making of a Swing Line Loan, each Lender shall be deemed to
have purchased from NationsBank a Participation therein in an amount equal
to that Lender's Applicable Commitment Percentage of such Swing Line Loan.
Upon demand made by NationsBank, each Lender shall, according to its
Applicable Commitment Percentage of such Swing Line Loan, promptly provide
to NationsBank its purchase price therefor in an amount equal to its
Participation therein. Any Advance made by a Lender pursuant to demand of
NationsBank of the purchase price of its Participation shall be deemed (i)
provided that the conditions to making Loans shall be satisfied, a Base
Rate Refunding Loan under Section 2.01(b) until the Borrower Converts such
Base Loan in accordance with the terms of Section 2.09, and (ii) in all
other cases, the funding by each Lender of the purchase price of its
Participation in such Swing Line Loan. The obligation of each Lender to so
provide its purchase price to NationsBank shall be absolute and
unconditional and shall not be affected by the occurrence of an Event of
Default or any other occurrence or event.
The Borrower, at its option and subject to the terms hereof, may request an
Advance pursuant to Section 2.01(b) in an amount sufficient to repay Swing
Line Outstandings on any date and the Agent shall provide from the proceeds
of such Advance to NationsBank the amount necessary to repay such Swing
Line Outstandings (which NationsBank shall then apply to such repayment)
and credit any balance of the Advance in immediately available funds in the
manner directed by the Borrower pursuant to Section 2.01(d)(ii). The
proceeds of such Advances shall be paid to NationsBank for application to
the Swing Line Outstandings and the Lenders shall then be deemed to have
made Loans in the amount of such Advances. The Swing Line shall continue in
effect until the Revolving Credit Termination Date, at which time all Swing
Line Outstandings and accrued interest thereon shall be due and payable in
full.
2.16 Revolving Credit Facility Extension and Term Loan Option
(a) With the consent of the Lenders (the "Consenting Lenders") having
seventy-five percent (75%) or more of the aggregate Credit Exposures of all
Lenders (any Lender not so consenting being referred to as a "Non-Consenting
Lender"), at each 364 Day Extension Date the Borrower can elect to extend the
364 Day Termination Date for an additional period of 364 days commencing on such
364 Day Extension Date; provided, however, that in no event shall the 364 Day
Termination Date be extended beyond the 5 Year Termination Date.
(b) The Borrower shall notify the Lenders of its request for such an extension
by delivering to the Agent notice of such request signed by an Authorized
Representative not more than sixty (60) days nor less than forty-five (45) days
prior to the applicable 364 Day Extension Date. Notice of receipt of such
request shall be provided by the Agent to the Lenders. The Agent shall notify
the Borrower in writing not later than thirty (30) days nor more than forty-five
(45) days prior to the applicable 364 Day Extension Date of the decision of the
Lenders. Failure by any Lender to respond to a request for an extension shall
constitute a refusal of such Lender to give its consent to such extension.
Failure by the Agent to give such notice to the Borrower as a result of not
receiving the consent of Lenders having seventy-five percent (75%) or more of
the aggregate Credit Exposures of all Lenders to such extension shall constitute
refusal by the Lenders to extend the 364 Day Termination Date.
(c) If less than all of the Lenders consent to any such request which has been
approved pursuant to subsection (a) of this Section 2.16, the Borrower shall
arrange not less than fifteen (15) days prior to the 364 Day Termination Date
(the "Replacement Lender Date") for one or more Consenting Lenders, or for one
or more other banks or financial institutions complying with the requirements
set forth in Section 12.01 (any of the foregoing referred to as an "Assuming
Lender"), as of the 364 Day Extension Date to effect an assignment of all of the
364 Day Commitment (along with an equivalent pro rata portion of the 5 Year
Commitment) of one or more Non-Consenting Lenders for a purchase price equal to
the aggregate principal balance of Revolving Credit Loans then owing to the
Non-Consenting Lender, plus accrued interest and fees owing to the
Non-Consenting Lender, as well as any amounts payable under Section 4.05. The
Borrower shall deliver written notice to the Agent and each Consenting Lender of
such arrangement with any Assuming Lender not less than fifteen (15) days prior
to the 364 Day Termination Date.
(d) On each 364 Day Extension Date, each Assuming Lender shall become a Lender
for all purposes under this Agreement and the other Loan Documents without any
further acknowledgment by or the consent of the other Lenders; provided,
however, that the Agent shall have received not less than ten (10) days prior to
such 364 Day Extension Date an Assignment and Acceptance, effective as of such
364 Day Extension Date, from each Assuming Lender duly executed by such Assuming
Lender and the applicable Non-Consenting Lender with respect to both the 364 Day
Facility and the 5 Year Facility. The Total 364 Day Commitment on the 364 Day
Extension Date shall be equal to the sum, without duplication, of the 364 Day
Commitments of each Assuming Lender and each Consenting Lender.
(e) If on any 364 Day Extension Date the Borrower has not so elected to extend
the 364 Day Termination Date then in effect, or if Consenting Lenders with
sufficient Credit Exposures have not consented to such extension, or if the
Borrower shall not have satisfied requirements of clause (c) of this Section
2.16 with respect to Non-Consenting Lenders, then as of such 364 Day Termination
Date, except as provided otherwise in, and subject to the Borrowers compliance
with the terms of, Section 2.16(f) below, (i) the Total 364 Day Commitment shall
be reduced to zero, and (ii) all 364 Day Outstandings shall be due and payable
in full.
(f) If with respect to any 364 Day Extension Date the Borrower does not so elect
to extend the 364 Day Termination Date then in effect, or if Consenting Lenders
with sufficient Credit Exposures have not consented to such extension, then not
less than fifteen (15) days prior to the 364 Day Termination Date, the Borrower
can elect to convert any or all 364 Day Outstandings as of such date into a term
loan on such date in the original principal amount equal to such 364 Day
Outstandings. 364 Day Outstandings so converted by the Borrower in accordance
with this Section 2.16 shall be referred to as the "Term Loans." The Total 364
Day Commitment shall be permanently reduced on the 364 Day Termination Date to
an amount equal to the aggregate principal amount of the Term Loans on such
date. The Term Loans shall be repaid upon the earlier of one year following the
364 Day Termination or the 5 Year Termination Date. The Term Loans may be
comprised of Base Loans and Eurodollar Loans as the Borrower may elect in
accordance with the provisions of this Article II for 364 Day Loans. The Term
Loans shall bear interest on the same terms as the 364 Day Loans prior to the
conversion to Term Loans until the Continuation or Conversion thereof pursuant
to Section 2.09 hereof. Amounts repaid or prepaid on the Term Loans may not be
reborrowed, and the 364 Day Commitment shall be permanently reduced by any such
amounts.
(g) If on the 364 Day Termination Date the Borrower does not so elect to convert
all of 364 Day Outstandings as of such date to Term Loans as described in (f)
above, then on the 364 Day Termination Date, (i) all 364 Day Outstandings as of
such date which are not so converted shall be due and payable in full and (ii)
the Total 364 Day Commitment shall be reduced to the amount, if any, of 364 Day
Outstandings so converted to Term Loans.
2.17 The Euro.
(a) If, as a result of the implementation of the EMU, (i) any currency available
for borrowing under this Agreement ( a national currency) ceases to be lawful
currency of the state issuing the same and is replaced by the Euro or (ii) any
national currency and the Euro are at the same time both recognized by the
central bank or comparable governmental authority of the state issuing such
currency as lawful currency of such state, then any amount payable hereunder by
any party hereto in such national currency (including, without limitation, any
Advance to be made under this Agreement) shall instead be payable in the Euro
and the amount so payable shall be determined by redenominating or converting
such amount into the Euro at the exchange rate officially fixed by the European
Central Bank for the purpose of implementing the EMU, provided, that to the
extent any EMU legislation provides that an amount denominated either in the
Euro or in the applicable national currency can be paid either in Euros or in
the applicable national currency, each party to this Agreement shall be entitled
to pay or repay such amount in Euros or in the applicable national currency.
Prior to the occurrence of the event or events described in clause (i) or (ii)
of the preceding sentence, each amount payable hereunder in any such national
currency will, except as otherwise provided herein, continue to be payable only
in that national currency.
(b) Borrower shall from time to time, at the request of the Agent, pay to the
Agent for the account of each Lender the amount of any cost or increased cost
incurred by, or of any reduction in any amount payable to or in the effective
return on its capital to, or of interest or other return foregone by, such
Lender or any holding company of such Lender as a result of the introduction of,
changeover to or operation of the Euro in any applicable state.
(c) In addition, this Agreement (including, without limitation, the definition
of Eurodollar Rate) will be amended to the extent determined by the Agent and
Required Lenders (acting reasonably and in consultation with the Borrower) to be
necessary to reflect such implementation of the EMU and change in currency and
to put the Lenders and the Borrower in the same position, so far as possible,
that they would have been in if such implementation and change in currency had
not occurred. Except as provided in the foregoing provisions of this Section, no
such implementation or change in currency nor any economic consequences
resulting therefrom shall (i) give rise to any right to terminate prematurely,
contest, cancel, rescind, alter, modify or renegotiate the provisions of this
Agreement or (ii) discharge, excuse or otherwise affect the performance of any
obligations of the Borrower under this Agreement, any Notes or other Loan
Documents.
<PAGE>
ARTICLE III
Letters of Credit
3.01 Letters of Credit. (a) NationsBank agrees, subject to the terms and
conditions of this Agreement, upon request of the Borrower to issue from time to
time for the account of the Borrower Letters of Credit upon delivery to
NationsBank of an Applications and Agreements for Letter of Credit in form and
content acceptable to NationsBank; provided, that the Letter of Credit
Outstandings shall not exceed the Total Letter of Credit Commitment; and
provided, further, that NationsBank shall not issue a Letter of Credit if it has
actual knowledge that the Borrower is not in compliance with the conditions to
making Loans set forth in this Agreement. No Letter of Credit shall be issued by
NationsBank with an expiry date or payment date occurring subsequent to the
fifth Business Day preceding the Stated 5 Year Termination Date. NationsBank
shall not issue any Letter of Credit if, after giving effect thereto, the
Outstanding 5 Year Obligations exceed the Total Revolving Credit Commitment.
(b) Upon completion of a proper Application and Agreement for Letter of
Credit, NationsBank may issue upon request and for the account of Borrower
Letters of Credit payable in an Alternative Currency. For purposes of
determining Letters of Credit Outstandings, any Letter of Credit issued in
an Alternative Currency shall be recorded in the Agents account in Dollars
based on the Alternative Currency Equivalent Amount on the date of issuance
of such Letter of Credit; provided, however, that the Agent shall determine
the Dollar Equivalent Amount of any Letter of Credit issued in an
Alternative Currency on the date of any Advance or Conversion for the
purpose of determining the amount of Letter of Credit Outstandings. Any
draw on a Letter of Credit issued in an Alternative Currency shall be
repaid in the same Alternative Currency Equivalent Amount (determined based
on the Spot Rate of Exchange on the date of drawing under the Letter of
Credit). To the extent that the Agent shall determine at any time that the
sum of (i) the Dollar Value of outstanding 5 Year Loans and outstanding
Letters of Credit, in each case determined on the date of each Advance of a
5 Year Loan or issuance of a Letter of Credit, made or issued in
Alternative Currencies exceeds the Total Alternative Currency Commitment,
the Borrower shall immediately repay Alternative Currency Loans so that
after giving effect to such payment the outstanding Alternative Currency
Loans plus outstanding Letters of Credit issued in an Alternative Currency
do not exceed the Total Alternative Currency Commitment.
3.02 Reimbursement
(a) The Borrower hereby unconditionally agrees to immediately pay to
NationsBank on demand at the Principal Office all amounts required to pay
all drafts drawn under the Letters of Credit and all reasonable expenses
incurred by NationsBank in connection with the Letters of Credit and in any
event and without demand to place in possession of NationsBank (which shall
include Advances under the 5 Year Facility if permitted by Section2.01(d)
hereof and Swing Line Loans if permitted under Section 2.15) sufficient
funds to pay all debts and liabilities arising under any Letter of Credit.
The Borrower's obligations to pay NationsBank under this Section 3.02, and
NationsBank's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever.
NationsBank agrees to give the Borrower prompt notice of any request for a
draw under a Letter of Credit. NationsBank may charge any account the
Borrower may have with it for any and all amounts NationsBank pays under a
Letter of Credit, plus charges and reasonable expenses as from time to time
agreed to by NationsBank and the Borrower; provided that to the extent
permitted by Section2.01(d)(iv) and Section 2.15, amounts shall be paid
pursuant to Advances under the 5 Year Facility or, if the Borrower shall
elect, by Swing Line Loans. The Borrower agrees to pay NationsBank interest
on any Reimbursement Obligations from the date of any draw at the Base Rate
plus two percent (2.0%) per annum, or the maximum rate permitted by
applicable law, if lower, such rate to be calculated on the basis of a year
of 360 days for actual days elapsed.
(b) In accordance with the provisions of Section 2.01(d)(iv), NationsBank
shall notify the Agent of any drawing under any Letter of Credit promptly
following the receipt by NationsBank of such drawing.
(c) Each Lender (other than NationsBank) shall automatically acquire on the
date of issuance thereof, a Participation in the liability of NationsBank
in respect of each Letter of Credit in an amount equal to such Lender's
Applicable Commitment Percentage of such liability, and to the extent that
the Borrower is obligated to pay NationsBank under Section 3.02(a), each
Lender (other than NationsBank) thereby shall absolutely, unconditionally
and irrevocably assume, and shall be unconditionally obligated to pay to
NationsBank as hereinafter described, its Applicable Commitment Percentage
of the liability of NationsBank under such Letter of Credit.
(i) Each Lender (including NationsBank in its capacity as a Lender)
shall, subject to the terms and conditions of Article II, pay to the
Agent for the account of NationsBank at the Principal Office in
Dollars and in immediately available funds, an amount equal to its
Applicable Commitment Percentage of any drawing under a Letter of
Credit, such funds to be provided in the manner described in Section
2.01(d)(iv).
(ii) Simultaneously with the making of each payment by a Lender to
NationsBank pursuant to Section 2.01(d)(iv)(B), such Lender shall,
automatically and without any further action on the part of
NationsBank or such Lender, acquire a Participation in an amount equal
to such payment (excluding the portion thereof constituting interest
accrued prior to the date the Lender made its payment) in the related
Reimbursement Obligation of the Borrower. The Reimbursement
Obligations of the Borrower shall be immediately due and payable
whether by Advances made in accordance with Section 2.01(d)(iv), Swing
Line Loans made in accordance with Section 2.15, or otherwise.
(iii) Each Lender's obligation to make payment to the Agent for the
account of NationsBank pursuant to Section 2.01(d)(iv) and this
Section 3.02(c), and the right of NationsBank to receive the same,
shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Lender is
obligated to pay but does not pay amounts to the Agent for the account
of NationsBank in full upon such request as required by Section
2.01(d)(iv) or this Section3.02(c), such Lender shall, on demand, pay
to the Agent for the account of NationsBank interest on the unpaid
amount for each day during the period commencing on the date of notice
given to such Lender pursuant to Section2.01(d) until such Lender
pays such amount to the Agent for the account of NationsBank in full
at the interest rate per annum for overnight borrowing by the Agent
from the Federal Reserve Bank.
(iv) In the event the Lenders have purchased Participations in any
Reimbursement Obligation as set forth in clause (ii) above, then at
any time payment (in fully collected, immediately available funds) of
such Reimbursement Obligation, in whole or in part, is received by
NationsBank from the Borrower, NationsBank shall promptly pay to each
Lender an amount equal to its Applicable Commitment Percentage of such
payment from the Borrower.
(d) Promptly following the end of each calendar quarter, NationsBank shall
deliver to the Agent a notice describing the aggregate undrawn amount of all
Letters of Credit at the end of such quarter. Upon the request of any Lender
from time to time, NationsBank shall deliver to the Agent, and the Agent shall
deliver to such Lender, any other information reasonably requested by such
Lender with respect to each Letter of Credit outstanding.
(e) The issuance by NationsBank of each Letter of Credit shall, in addition to
the conditions precedent set forth in Section 6.01 hereof, be subject to the
conditions that such Letter of Credit be in such form and contain such terms as
shall be reasonably satisfactory to NationsBank consistent with the then current
practices and procedures of NationsBank with respect to similar letters of
credit, and the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letters of Credit as NationsBank
shall have reasonably requested consistent with such practices and procedures.
All Letters of Credit shall be issued pursuant to and subject to the Uniform
Customs and Practice for Documentary Credits, 1993 revision, International
Chamber of Commerce Publication No.500 and all subsequent amendments and
revisions thereto.
(f) Without duplication of Section 12.05 hereof, the Borrower hereby agrees to
indemnify and hold harmless NationsBank and each other Lender from and against
any and all claims and damages, losses, liabilities, reasonable costs and
expenses which NationsBank and each other Lender or the Agent may incur (or
which may be claimed against NationsBank and each other Lender by any Person) by
reason of or in connection with the issuance or transfer of or payment or
failure to pay under any Letter of Credit; provided that the Borrower shall not
be required to indemnify NationsBank and each other Lender for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, (i)caused by the willful misconduct or gross negligence of the party to
be indemnified or (ii)caused by the failure of NationsBank to pay under any
Letter of Credit after the presentation to it of a request strictly complying
with the terms and conditions of such Letter of Credit, unless such payment is
prohibited by any law, regulation, court order or decree. The indemnification
and hold harmless provisions of this Section 3.02(f) shall survive repayment of
the Obligations, occurrence of the Revolving Credit Termination Date and
expiration or termination of this Agreement.
(i) any lack of validity or enforceability of the Letter of Credit, the
obligation supported by the Letter of Credit or any other agreement or
instrument relating thereto (collectively, the "Related Documents");
(ii) any amendment or waiver of or any consent to or departure from all or
any of the Related Documents;
(iii) the existence of any claim, setoff, defense (other than the defense
of payment in accordance with the terms of this Agreement) or other rights
which the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), the Agent, the
Lenders or any other person or entity, whether in connection with the Loan
Documents, the Related Documents or any unrelated transaction;
(iv) any breach of contract or other dispute between the Borrower and any
beneficiary or any transferee of a Letter of Credit (or any persons or
entities for whom such beneficiary or any such transferee may be acting),
the Agent, the Lender or any other Person;
(v) any draft, statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) any delay, extension of time, renewal, compromise or other indulgence
or modification granted or agreed to by the Lender, with or without notice
to or approval by the Borrower in respect of any of the Borrower's
Obligations under this Agreement; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing;
provided, however, that nothing contained herein shall be deemed to release
NationsBank of any liability for actual loss arising as a result of its
gross negligence or willful misconduct or out of the wrongful dishonor by
NationsBank of a proper demand for payment made under and strictly
complying with the terms of any Letter of Credit.
3.03 Letter of Credit Fee. The Borrower agrees to pay to the Agent, for the pro
rata benefit of the Lenders, a fee on the aggregate amount available to be drawn
on each Outstanding Letter of Credit at a rate equal to the Applicable Margin
for a Eurodollar Loan. In addition, the Borrower agrees to pay to NationsBank a
Letter of Credit fronting fee equal to one-eighth of one percent per annum of
Letter of Credit Outstandings. Such payment of fees provided for in this Section
3.03 shall be due with respect to each Letter of Credit quarterly in arrears on
the last Business Day of each March, June, September and December, beginning on
the first such date following issuance of a Letter of Credit. Such fee shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed.
3.04 Administrative Fees and Reserves. The Borrower shall pay to NationsBank
such administrative fee and other fees, if any, in connection with the Letters
of Credit in such amounts and at such times as NationsBank and the Borrower
shall agree from time to time.
<PAGE>
ARTICLE IV
Change in Circumstances
4.01 Increased Cost and Reduced Return
(a) If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending Office) to any
tax, duty, or other charge with respect to any Absolute Rate Loan,
Eurodollar Loans, its Note, or its obligation to make Absolute Rate Loans
or Eurodollar Loans, or change the basis of taxation of any amounts payable
to such Lender (or its Applicable Lending Office) under this Agreement or
its Note in respect of any Absolute Rate Loans or Eurodollar Loans (other
than taxes imposed on the overall net income of such Lender by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office or franchise taxes or related taxes imposed on
such Lender);
(ii) shall impose, modify, or deem applicable any reserve, special deposit,
assessment, or similar requirement (other than the Reserve Requirement
utilized in the determination of the Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Lender (or its Applicable Lending
Office), including the Revolving Credit Commitment of such Lender
hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending Office) or on
the London interbank market any other condition affecting this Agreement or
its Note or any of such extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Absolute Rate Loans or Eurodollar Loans or
to reduce any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or its Note with respect to any
Absolute Rate Loans or Eurodollar Loans, then the Borrower shall pay to
such Lender on demand such amount or amounts as will compensate such Lender
for such increased cost or reduction. If any Lender requests compensation
by the Borrower under this Section 4.01(a), the Borrower may, by notice to
such Lender (with a copy to the Agent), suspend the obligation of such
Lender to make or Continue Loans of the Type with respect to which such
compensation is requested, or to Convert Loans of any other Type into Loans
of such Type, until the event or condition giving rise to such request
ceases to be in effect (in which case the provisions of Section 4.04 shall
be applicable); provided that such suspension shall not affect the right of
such Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have determined that the
adoption of any applicable law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lender's
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) Without limiting the foregoing but without duplication for any Associated
Costs reimbursed pursuant to Section 4.01(a) or (b), as to any Alternative
Currency Loan denominated in British Pounds, the Borrower will pay the
Associated Costs.
(d) Each Lender shall promptly notify the Borrower and the Agent of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to it. Any Lender claiming
compensation under this Section shall prior to its collection furnish to the
Borrower and the Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
4.02. Limitation on Types of Loans. If on or prior to the first day of any
Interest Period for any Eurodollar Loan;
(a) the Agent determines (which determination shall be conclusive absent
manifest error) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding Eurodollar
Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as
such condition remains in effect, the Lenders shall be under no obligation
to make additional Loans of such Type, Continue Loans of such Type, or to
Convert Loans of any other Type into Loans of such Type and the Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Loans of the affected Type, either prepay such Loans or Convert
such Loans into another Type of Loan in accordance with the terms of this
Agreement.
4.03 Illegality. Notwithstanding any other provision of this Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make or
Continue Eurodollar Loans and to Convert other Types of Loans into Eurodollar
Loans shall be suspended until such time as such Lender may again make,
maintain, and fund Eurodollar Loans (in which case the provisions of Section
4.04 shall be applicable).
4.04 Treatment of Affected Loans. If the obligation of any Lender to make a
particular Eurodollar Loan or to Continue, or to Convert Loans of any other Type
into, Loans of a particular Type shall be suspended pursuant to Section 4.01 or
4.03 hereof (Loans of such Type being herein called "Affected Loans" and such
Type being herein called the "Affected Type"), such Lender's Affected Loans
shall be automatically Converted into Base Loans on the last day(s) of the then
current Interest Period(s) for Affected Loans (or, in the case of a Conversion
required by Section 4.03 hereof, on such earlier date as such Lender may specify
to the Borrower with a copy to the Agent) and, unless and until such Lender
gives notice as provided below that the circumstances specified in Section 4.01
or 4.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been so Converted,
all payments and prepayments of principal that would otherwise be applied
to such Lender's Affected Loans shall be applied instead to its Base Loans;
and
(b) all Loans that would otherwise be made or Continued by such Lender as
Loans of the Affected Type shall be made or Continued instead as Base
Loans, and all Loans of such Lender that would otherwise be Converted into
Loans of the Affected Type shall be Converted instead into (or shall remain
as) Base Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that
the circumstances specified in Section 4.01 or 4.03 hereof that gave rise
to the Conversion of such Lender's Affected Loans pursuant to this Section
4.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type
made by other Lenders are outstanding, such Lender's Base Loans shall be
automatically Converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding Loans of the Affected Type, to the
extent necessary so that, after giving effect thereto, all Loans held by
the Lenders holding Loans of the Affected Type and by such Lender are held
pro rata (as to principal amounts, Types, and Interest Periods) in
accordance with their respective Commitments.
4.05 Compensation. Upon the request of any Lender, the Borrower shall pay to
such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of an Absolute Rate Loan or a
Eurodollar Loan for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 10.01) on a date other than
the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article VI
to be satisfied) to borrow, Convert, Continue, or prepay an Absolute Rate
Loan or a Eurodollar Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of borrowing,
prepayment, Continuation, or Conversion under this Agreement.
4.06 Taxes. (a) Any and all payments by the Borrower to or for the account of
any Lender or the Agent hereunder or under any other Loan Document shall be made
free and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender (or its Applicable Lending
Office) or the Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable under this Agreement or any other Loan Document
to any Lender or the Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.06) such Lender or the Agent
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law, and (iv) the Borrower
shall furnish to the Agent, at its address referred to in Section 12.02, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this
Agreement or any other Loan Document or from the execution or delivery of,
or otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section 4.06) paid by such Lender or the Agent (as the case may
be) and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Lender listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender in the case
of each other Lender, and from time to time thereafter if requested in
writing by the Borrower or the Agent (but only so long as such Lender
remains lawfully able to do so), shall provide the Borrower and the Agent
with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on
payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) Internal Revenue Service Form W-8 or
W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any
taxing authority (including any certificate required by Sections 871(h) and
881(c) of the Internal Revenue Code), certifying that such Lender is
entitled to an exemption from tax on payments pursuant to this Agreement or
any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide the
Borrower and the Agent with the appropriate form pursuant to Section
4.06(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to
indemnification under Section 4.06(a) or 4.06(b) with respect to Taxes
imposed by the United States; provided, however, that should a Lender,
which is otherwise exempt from withholding tax, become subject to Taxes
because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request to assist
such Lender to recover such Taxes at the Lenders expense.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 4.06, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent the original or a certified copy of a
receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 4.06 shall survive the termination of the
Commitments and the payment in full of the Notes.
(i) To the extent that the payment of any Lenders Taxes by the Borrower in
accordance with this Section 4.06 gives rise from time to time to a Tax
Benefit (as hereinafter defined) to such Lender in any jurisdiction other
than the jurisdiction which imposed such Taxes, such Lender shall pay to
the Borrower the amount of each such Tax Benefit so recognized or received.
The amount of each Tax Benefit and, therefore, payment to the Borrower will
be determined from time to time by the relevant Lender in its sole
discretion, which determination shall be binding and conclusive on all
parties hereto. Each such payment will be due and payable by such Lender to
the Borrower within a reasonable time after the filing of the income tax
return in which such Tax Benefit is recognized or, in the case of any tax
refund, after the refund is received; provided, however, if at any time
thereafter such Lender is required to rescind such Tax Benefit or such Tax
Benefit is otherwise disallowed or nullified, the Borrower shall promptly,
after notice thereof from such Lender, repay to Lender the amount of such
Tax Benefit previously paid to the Borrower and rescinded, disallowed or
nullified. For purposes of this section, Tax Benefit shall mean the
amount by which any Lenders income tax liability for the taxable period in
question is reduced below what would have been payable had the Borrower not
been required to pay the Lenders Taxes. In case of any dispute with
respect to the amount of any payment the Borrower shall have no right to
any offset or withholding of payments with respect to future payments due
to any Lender under this Agreement or the Notes.
<PAGE>
ARTICLE V
Guaranties
5.01 Guaranties. As security for the full and timely payment and performance of
all Obligations, the Loan Parties shall on or before the Closing Date do all
things necessary in the opinion of the Agent to cause each of its Material
Subsidiaries and its Receivables Subsidiaries to execute and deliver to the
Agent for the benefit of the Lenders the Guaranty Agreement.
<PAGE>
ARTICLE VI
Conditions to Making Loans and Issuing
Letters of Credit
6.01 Conditions of Advance and Issuance of Letters of Credit. The obligation of
the Lenders to make the initial Advance and of NationsBank to issue the Letters
of Credit (other than Existing Letters of Credit) and to make Swing Line Loans
pursuant to this Agreement is subject to the conditions precedent that the Agent
shall have received on the Closing Date, in form and substance satisfactory to
the Agent and the Lenders, the following:
(a) executed originals of each of this Agreement, the Notes and the other
Loan Documents, together with all schedules and exhibits thereto;
(b) favorable written opinions of special counsel to the Loan Parties dated
the Closing Date, addressed to the Lender substantially in the form of
Exhibits I-1 and I-2 attached hereto;
(c) resolutions of the boards of directors or other appropriate governing
body (or of the appropriate committee thereof) of the Loan Parties
certified by its secretary or assistant secretary as of the Closing Date,
appointing (in the case of the Borrower) the initial Authorized
Representative and approving and adopting the Loan Documents to be executed
by such Person, and authorizing the execution and delivery thereof;
(d) specimen signatures of officers of each of the Loan Parties executing
the Loan Documents on behalf of such Person, certified by the secretary or
assistant secretary of the Borrower or Guarantor, as applicable;
(e) the charter documents and bylaws of each of the Loan Parties, certified
by the secretary or assistant secretary of such Guarantor;
(f) certificates issued as of a recent date by the Secretaries of State of
the jurisdiction of incorporation of each of the Loan Parties as to the due
existence and good standing of the Borrower and each Guarantor therein;
(g) appropriate certificates of qualification to do business, good standing
and, where appropriate, authority to conduct business under assumed name,
issued in respect of the Borrower as of a recent date by the Secretary of
State or comparable official of each jurisdiction in which the failure to
be qualified to do business or authorized so to conduct business could
materially adversely affect the business, operations or conditions,
financial or otherwise, of the Borrower or any Guarantor;
(h) receipt by the Agent and the Lenders of such fees and other
consideration as may be required by the terms of the commitment to lend;
(i) notice of appointment of the initial Authorized Representative;
(j) evidence of insurance required by the Loan Documents; and
(k) such other documents, instruments, certificates and opinions as the
Agent may reasonably request on or prior to the Closing Date in connection
with the consummation of the transactions contemplated hereby.
6.02 Conditions of Loans. The obligations of the Lenders to make any Loans and
of NationsBank to issue Letters of Credit and to make Swing Line Loans hereunder
on or subsequent to the Closing Date are subject to the satisfaction of the
following conditions:
(a) the Agent, or NationsBank, in the case of Swing Line Loans, shall have
received a Borrowing Notice if required by Article II hereof;
(b) the representations and warranties of the Borrower set forth in Article
VII hereof and in each of the other Loan Documents shall be true and
correct in all material respects on and as of the date of such Advance,
Swing Line Loan or issuance of such Letters of Credit, as the case may be,
with the same effect as though such representations and warranties had been
made on and as of such date, except to the extent that such representations
and warranties expressly relate to an earlier date and except that the
financial statements referred to in Section7.01(f)(i) shall be deemed to
be those financial statements most recently delivered to the Agent and the
Lenders pursuant to Section8.01 hereof;
(c) in the case of the issuance of a Letter of Credit, Borrower shall have
executed and delivered to NationsBank an Applications and Agreements for
Letter of Credit in form and content reasonably acceptable to NationsBank
together with such other instruments and documents as it shall reasonably
request;
(d) at the time of, and after giving effect to, each such Advance, Swing
Line Loan or issuance of each Letter of Credit, as the case may be, no
Default or Event of Default specified in Article X hereof, shall have
occurred and be continuing; and
(e) immediately after giving effect to:
(i) a 364 Day Loan, the aggregate principal amount of all outstanding
364 Day Loans for each Lender shall not exceed such Lenders 364 Day
Commitment;
(ii) a 5 Year Loan, the aggregate principal balance of all outstanding
5 Year Loans for each Lender shall not exceed such Lender's 5 Year
Commitment;
(iii) a Letter of Credit, the aggregate principal balance of all
outstanding Participations in Letters of Credit and Reimbursement
Obligations (or in the case of NationsBank, its remaining interest
after deduction of all Participations in Letters of Credit and
Reimbursement Obligations of other Lenders) for each Lender and in the
aggregate shall not exceed, respectively, (X) such Lender's Letter of
Credit Commitment or (Y) the Total Letter of Credit Commitment;
(iv) a Swing Line Loan, the Swing Line Outstandings shall not exceed
$20,000,000; and
(v) a 5 Year Loan (including a Swing Line Loan) or a Letter of Credit,
the sum of Outstanding 5 Year Outstandings shall not exceed the Total
Revolving Credit Commitment.
Each borrowing of Loans and each issuance of a Letter of Credit shall
constitute a representation and warranty by the Borrower that the
conditions set forth in clauses (b) and (e) above have been satisfied
as of the date thereof and that as of the date of such Advance or
issuance of a Letter of Credit there has not been any material adverse
change in the business, operations or financial condition of the
Borrower and its Subsidiaries.
<PAGE>
ARTICLE VII
Representations and Warranties
7.01 Representations and Warranties. The Borrower represents and warrants with
respect to itself and each Subsidiary (which representations and warranties
shall survive the delivery of the documents mentioned herein and the making of
Loans), that:
(a) Organization and Authority.
(i) the Borrower is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation;
(ii) the Borrower (x) has the requisite power and authority to own its
properties and assets and to carry on its business as now being
conducted and as contemplated in the Loan Documents, and (y) is
qualified to do business in every jurisdiction in which failure so to
qualify would have a Material Adverse Effect;
(iii) the Borrower has the power and authority to execute, deliver and
perform this Agreement and the Notes, and to borrow hereunder, and to
execute, deliver and perform each of the other Loan Documents to which
it is a party;
(iv) each Guarantor has the power and authority to execute, deliver
and perform the Guaranty Agreement and each of the other Loan
Documents to which it is a party; and
(v) when executed and delivered, each of the Loan Documents to which
Borrower and any Guarantor is a party will be the legal, valid and
binding obligation or agreement, as the case may be, of the Borrower
or Guarantor, as the case may be, enforceable against the Borrower and
such Guarantor in accordance with its terms, subject to the effect of
any applicable bankruptcy, moratorium, insolvency, reorganization or
other similar law affecting the enforceability of creditors' rights
generally, to the effect of general principles of equity which may
limit the availability of equitable remedies (whether in a proceeding
at law or in equity).
(b) Loan Documents. The execution, delivery and performance by the Loan
Parties of each of the Loan Documents to which it is a party:
(i) have been duly authorized by all requisite corporate action
(including any required shareholder approval) of each of the Loan
Parties required for the lawful execution, delivery and performance
thereof;
(ii) do not violate any provisions of (1)any applicable law, rule or
regulation, (2) any order of any court or other agency of government
binding on the Loan Parties or their respective properties, or (3)the
charter documents or by-laws of the Loan Parties;
(iii) does not and will not be in conflict with, result in a breach of
or constitute an event of default, or an event which, with notice or
lapse of time, or both, would constitute an event of default, under
any material indenture, agreement or other instrument to which the
Loan Parties are a party, or by which the properties or assets of the
Loan Parties are bound;
(iv) does not and will not result in the creation or imposition of any
Lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Loan Parties except any liens in favor of
the Agent for the benefit of the Lenders created by the Loan
Documents.
(c) Solvency. Borrower is Solvent after giving effect to the transactions
contemplated by this Agreement and the other Loan Documents.
(d) Subsidiaries and Stockholders. Borrower has no Subsidiaries other than
those Persons listed as Subsidiaries in Schedule 7.01(d) hereto; Schedule
7.01(d) to this Agreement states as of the date hereof the authorized and
issued capitalization of each Subsidiary listed thereon, the number of
shares or other equity interests of each class of capital stock or interest
issued and outstanding of each such Subsidiary and the number and/or
percentage of outstanding shares or other equity interest (including
options, warrants and other rights to acquire any interest) of each such
class of capital stock or equity interest owned by Borrower or by any such
Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable; and Borrower and each such Subsidiary owns beneficially
and of record all the shares and other interests it is listed as owning in
Schedule 7.01(d), free and clear of any Lien.
(e) Ownership Interests. Borrower owns no interest in any Person other than
the Persons listed in Schedule 7.01(d) hereto and Eligible Securities;
(f) Financial Condition. (i) The Borrower (f/k/a AssuStaff, Incorporated)
has heretofore furnished to the Agent for the benefit of the Lenders (a) an
audited consolidated balance sheet of the Borrower and its Subsidiaries as
at December 31, 1996 and December 31, 1997 and the notes thereto and
related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997 as
examined and certified by PricewaterhouseCoopers LLP (f/k/a Coopers &
Lybrand), (b) an unaudited consolidated balance sheet of the Borrower and
its Subsidiaries (excluding the Strategix Subsidiaries) and the related
unaudited consolidated statements of income, stockholders equity and cash
flows for each of the three years in the period ended December 31, 1997,
(c) unaudited interim financial statements of the Borrower and its
Subsidiaries consisting of a consolidated balance sheet and related
consolidated statements of income and cash flow, in each case without
notes, for and as of the six month period ending June 30, 1998 and (d)
unaudited pro forma interim financial statements of the Borrower and its
Subsidiaries consisting of a consolidated balance sheet as of June 30, 1998
giving effect to the sale of the Strategix Subsidiaries and a consolidated
statement of income for the twelve month period ending June 30, 1998,
giving effect to the sale of the Strategix Subsidiaries as at June 30,
1997. Except as set forth therein, such financial statements (including the
notes thereto) present fairly the financial condition of the Borrower and
its Subsidiaries (other than the Strategix Subsidiaries where indicated
above) as of the end of such Fiscal Years and six month period and results
of their operations and the changes in their stockholders' equity for the
Fiscal Years and interim periods then ended, all in conformity with
Generally Accepted Accounting Principles applied on a Consistent Basis,
subject however, in the case of unaudited interim statements to year end
adjustments to the extent applicable;
(ii) since December 31, 1997, there has been no material adverse
change in the condition, financial or otherwise, of the Borrower and
its Subsidiaries (other than as a result of the sale of the Strategix
Subsidiaries) considered as a whole or in the businesses, properties
and operations of the Borrower and its Subsidiaries, considered as a
whole, nor have such businesses or properties, considered as a whole,
been materially adversely affected as a result of any fire, explosion,
earthquake, accident, strike, lockout, combination of workers, flood,
embargo or act of God;
(iii) except as set forth in the financial statements referred to in
Section 7.01(f)(i) or in Schedule 7.01(f) or Schedule 7.01(j) hereto,
neither Borrower nor any Subsidiary has incurred, other than in the
ordinary course of business, any material indebtedness, obligations,
commitments or other liability contingent or otherwise which remain
outstanding or unsatisfied;
(g) Title to Properties. The Borrower has title to all its real and
personal properties, subject to no transfer restrictions or Liens of any
kind, except for (x) the transfer restrictions and Liens described in
Schedule 7.01(g)-Liens attached hereto and incorporated herein by
reference, and (y) any other Permitted Liens;
(h) Taxes. The Borrower and each Subsidiary has filed or caused to be filed
all federal, state and local tax returns which are required to be filed by
it and except for taxes and assessments being contested in good faith and
against which reserves satisfactory to the Borrower's independent certified
public accountants have been established, has paid or caused to be paid all
taxes as shown on said returns or on any assessment received by it, to the
extent that such taxes have become due;
(i) Other Agreements. Neither the Borrower nor any Subsidiary is
(i) a party to any judgment, order, decree or any agreement or
instrument or subject to restrictions materially adversely affecting
the business, properties or assets, operation or condition (financial
or otherwise) of the Borrower or any Subsidiary considered as a whole;
or
(ii) in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement
or instrument to which the Borrower or any Subsidiary is a party,
which default has, or if not remedied within any applicable grace
period could have a Material Adverse Effect;
(j) Litigation. Except as set forth in Schedule7.01(j) hereto, there is no
action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or agency or arbitral body pending, or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or affecting the Borrower or any Subsidiary or any properties or
rights of the Borrower or any Subsidiary, which could reasonably be
expected to have a Material Adverse Effect;
(k) Margin Stock.The proceeds of the borrowings made pursuant to Article
II hereof will be used by the Borrower only for the purposes set forth in
Section 2.14 hereof. None of such proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock or
for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry margin stock or for any other
purpose which might constitute any of the Loans under this Agreement a
"purpose credit" within the meaning of said Regulation U or Regulation X
(12 C.F.R. Part 224) of the Board. Neither the Borrower nor any agent
acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant
hereto to violate any regulation of the Board or to violate the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as
amended, or any state securities laws, in each case as in effect on the
date hereof;
(l) Investment Company. Neither the Borrower nor any Subsidiary is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (15 U.S.C.
80a-1, et seq.). The application of the proceeds of the Loans and
repayment thereof by the Borrower and the performance by the Borrower of
the transactions contemplated by this Agreement will not violate any
provision of said Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder, in each case as in effect on
the date hereof;
(m) Patents, Etc. Except as set forth in Schedule 7.01(j), the Borrower and
each Subsidiary owns or has the right to use, under valid license
agreements or otherwise, all material patents, licenses, franchises,
trademarks, trademark rights, trade names, trade name rights, trade secrets
and copyrights necessary to the conduct of its business as now conducted,
without known conflict with any patent, license, franchise, trademark,
trade secrets and confidential commercial or proprietary information, trade
name, copyright, rights to trade secrets or other proprietary rights of any
other Person which conflict could reasonably be expected to have a Material
Adverse Effect;
(n) No Untrue Statement. Neither this Agreement nor any other Loan Document
or certificate or document executed and delivered by or on behalf of the
Borrower or any Guarantor in accordance with or pursuant to any Loan
Document contains any misrepresentation or untrue statement of material
fact or omits to state a material fact necessary, in light of the
circumstance under which it was made, in order to make any such
representation or statement contained therein not misleading in any
material respect;
(o) No Consents, Etc. Neither the respective businesses or properties of
the Borrower or any Subsidiary, nor any relationship between the Borrower
or any Subsidiary and any other Person, nor any circumstance in connection
with the execution, delivery and performance of the Loan Documents and the
transactions contemplated hereby is such as to require a consent, approval
or authorization of, or filing, registration or qualification with, any
governmental or other authority or any other Person on the part of the
Borrower or any Subsidiary as a condition to the execution, delivery and
performance of, or consummation of the transactions contemplated by, this
Agreement or the other Loan Documents or if so, such consent, approval,
authorization, filing, registration or qualification has been obtained or
effected, as the case may be;
(p) ERISA.
(i) None of the employee benefit plans maintained at any time by the
Borrower or any Subsidiary or the trusts created thereunder has
engaged in a prohibited transaction which could subject any such
employee benefit plan or trust to a material tax or penalty on
prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA;
(ii) None of the employee benefit plans maintained at any time by the
Borrower or any Subsidiary which are employee pension benefit plans
and which are subject to Title IV of ERISA or the trusts created
thereunder has been terminated so as to result in a material liability
of the Borrower or any Subsidiary under ERISA nor has any such
employee benefit plan of the Borrower or any Subsidiary incurred any
material liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, other than for required insurance which
have been paid or are not yet due and payable; neither the Borrower
nor any Subsidiary has withdrawn from or caused a partial withdrawal
to occur with respect to any Multi-employer Plan resulting in any
assessed and unpaid withdrawal liability; the Borrower and each
Subsidiary has made or provided for all contributions to all such
employee pension benefit plans which they maintain and which are
required as of the end of the most recent fiscal year under each such
plan; neither the Borrower nor any Subsidiary has incurred any
accumulated funding deficiency with respect to any such plan, whether
or not waived; nor has there been any reportable event, or other event
or condition, which presents a material risk of termination of any
such employee benefit plan by such Pension Benefit Guaranty
Corporation;
(iii) The present value of all vested accrued benefits under the
employee pension benefit plans which are subject to Title IV of ERISA,
maintained by the Borrower or any Subsidiary did not, as of the most
recent valuation date for each such plan, exceed the then current
value of the assets of such employee benefit plans allocable to such
benefits;
(iv) The consummation of the Loans and the issuance of the Letters of
Credit provided for in Article II and Article III will not involve any
prohibited transaction under ERISA which is not subject to a statutory
or administrative exemption;
(v) To the best of the Borrower's knowledge, each employee pension
benefit plan subject to Title IV of ERISA, maintained by the Borrower
or any Subsidiary, has been administered in accordance with its terms
in all material respects and is in compliance in all material respects
with all applicable requirements of ERISA and other applicable laws,
regulations and rules;
(vi) There has been no material withdrawal liability incurred and
unpaid with respect to any Multi-employer Plan to which the Borrower
or any Subsidiary is or was a contributor;
(vii) As used in this Agreement, the terms "employee benefit plan,"
"employee pension benefit plan," "accumulated funding deficiency,"
"reportable event," and "accrued benefits" shall have the respective
meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Code Section
4975 and ERISA;
(viii) Neither the Borrower nor any Subsidiary has any liability not
disclosed on any of the financial statements furnished to the Lenders
pursuant to Section 7.01(f) hereof, contingent or otherwise, under any
plan or program or the equivalent for unfunded post-retirement
benefits, including pension, medical and death benefits, which
liability would have a Material Adverse Effect.
(q) No Default. As of the date hereof, there does not exist any Default or
Event of Default hereunder;
(r) Hazardous Materials. The Borrower and each Subsidiary is in compliance
with all applicable Environmental Laws in all material respects. Neither
the Borrower nor any Subsidiary has been notified of any action, suit,
proceeding or investigation which calls into question compliance by the
Borrower or any Subsidiary with any Environmental Laws or which seeks to
suspend, revoke or terminate any license, permit or approval necessary for
the generation, handling, storage, treatment or disposal of any Hazardous
Material;
(s) RICO. Neither the Borrower nor any Subsidiary is engaged in and has not
engaged in any course of conduct that could subject any of their respective
properties to any Lien, seizure or other forfeiture under any criminal law,
racketeer influenced and corrupt organizations law, civil or criminal, or
other similar laws;
(t) Employment Matters. Except as set forth on Schedule 7.01(t), the
Borrower and each Subsidiary is in compliance in all material respects with
all applicable laws, rules and regulations pertaining to labor or
employment matters, including without limitation those pertaining to wages,
hours, occupational safety and taxation and there is neither pending or
threatened any material litigation, administrative proceeding nor, to the
knowledge of the Borrower, any investigation, in respect of such matters
which could reasonably be expected to have a Material Adverse Effect;
(u) Year 2000 Compliance. The Borrower and its Subsidiaries have (i)
initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by
information received from suppliers and vendors) that could reasonably be
expected to be materially adversely affected by the Year 2000 Problem, (ii)
developed a plan and time line for addressing the Year 2000 Problem on a
timely basis, and (iii) to date, implemented that plan substantially in
accordance with that timetable. The Borrower reasonably believes that all
computer applications (including those affected by information received
from its suppliers and vendors) that are material to its or any of its
Subsidiaries' business and operations will on a timely basis be Year 2000
Compliant, except to the extent that a failure to do so could not
reasonably be expected to have Material Adverse Effect.
<PAGE>
ARTICLE VIII
Affirmative Covenants
Until the Obligations have been paid and satisfied in full and this Agreement
has been terminated in accordance with the terms hereof, unless the Required
Lenders shall otherwise consent in writing, the Borrower will and will cause
each Subsidiary to:
8.01 Financial Reports, Etc. (a) as soon as practical and in any event within 95
days after the end of each Fiscal Year of the Borrower, deliver or cause to be
delivered to the Agent (i) a consolidated balance sheet of the Borrower and its
Subsidiaries, and the notes thereto, and the related consolidated statements of
income, stockholders' equity and cash flows and the respective notes thereto,
for such Fiscal Year, setting forth comparative financial statements for the
preceding Fiscal Year, all prepared in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis and containing opinions of
PricewaterhouseCoopers LLP, or other such independent certified public
accountants selected by the Borrower and approved by the Agent, which are
unqualified as to the scope of the audit performed and as to the "going concern"
status of the Borrower; and (ii) a certificate of an Authorized Representative
demonstrating compliance with Sections 9.01, 9.02, 9.03, 9.04(d), 9.06(vi) and
9.08 of this Agreement, which certificate shall be in the form attached hereto
as Exhibit J;
(b) as soon as practical and in any event within 50 days after the end of
each fiscal quarter (except the last of the Fiscal Year), deliver to the
Agent (i)a consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such reporting period, the related consolidated statements
of income, stockholders' equity and cash flows for such reporting period
and for the period from the beginning of the Fiscal Year through the end of
such reporting period, accompanied by a certificate of an Authorized
Representative to the effect that such financial statements present fairly
the financial position of the Borrower and its Subsidiaries as of the end
of such reporting period and the results of their operations and the
changes in their financial position for such reporting period, in
conformity with the standards set forth in Section 7.01(f)(i) with respect
to interim financials and (ii) a certificate of an Authorized
Representative containing computations for such quarter comparable to that
required pursuant to Section 8.01(a)(ii);
(c) together with each delivery of the financial statements required by
Section 8.01(a)(i) hereof, deliver to the Agent a letter from the
Borrower's accountants specified in Section 8.01(a)(i) hereof stating that
in performing the audit necessary to render an opinion on the financial
statements delivered under Section 8.01(a)(i), they obtained no knowledge
of any Default or Event of Default by the Borrower or any Guarantor in the
fulfillment of the terms and provisions of this Agreement insofar as they
relate to financial covenants (which at the date of such statement remains
uncured); and if the accountants have obtained knowledge of such Default or
Event of Default, a statement specifying the nature and period of existence
thereof;
(d) promptly upon their becoming available to the Borrower, the Borrower
shall deliver to the Agent a copy of (i)all regular or special reports or
effective registration statements which Borrower or any Subsidiary shall
file with the Securities and Exchange Commission (or any successor thereto)
or any securities exchange, (ii) any proxy statement distributed by the
Borrower to its shareholders, bondholders or the financial community in
general, and (iii) any management letter or other report submitted to the
Borrower or any of its Subsidiaries by independent accountants in
connection with any annual, interim or special audit of the Borrower or any
of its Subsidiaries;
(e) The Agent and the Lenders are hereby authorized to deliver a copy of
any such financial information delivered hereunder to the Lenders (or any
affiliate of any Lender) or the Agent, to any regulatory authority having
jurisdiction over the Agent or the Lenders pursuant to any request
therefor, to any other Person who shall acquire or consider the acquisition
of a participation interest in or assignment of any Loan or Letter of
Credit permitted by this Agreement and to any affiliate of the Lenders.
8.02 Maintain Properties. Maintain all material properties necessary to its
operations in good working order and condition (ordinary wear and tear excepted)
and make all needed repairs, replacements and renewals as are necessary to
conduct its business in accordance with customary business practices.
8.03 Existence, Qualification, Etc. Do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and all material
rights and franchises, trade names, trademarks and permits and maintain its
license or qualification to do business as a foreign corporation and good
standing in each jurisdiction in which the failure to so maintain or qualify
would have a material adverse affect on the Borrower or its Subsidiaries
considered as a whole.
8.04 Regulations and Taxes. Comply with or contest in good faith all material
statutes and governmental regulations and pay all material taxes, assessments,
governmental charges, claims for labor, supplies, rent and any other obligation
which, if unpaid, might become a Lien against any of its properties except
liabilities being contested in good faith and against which adequate reserves
have been established in accordance with Generally Accepted Accounting
Principles and liabilities.
8.05 Insurance. (i) Keep all of its insurable properties adequately insured at
all times with responsible insurance carriers against loss or damage by fire and
other hazards to the extent and in the manner customarily insured against by
similar businesses owning such properties similarly situated, (ii) maintain
general public liability insurance at all times with responsible insurance
carriers against liability on account of damage to persons and property having
such limits, deductibles, exclusions and co-insurance and other provisions
providing no less coverage than that specified in Schedule 8.05 attached hereto,
such insurance policies to be in form satisfactory to the Agent, and (iii)
maintain insurance under all applicable workers' compensation laws (or in the
alternative, maintain required reserves if self-insured for workers'
compensation purposes).
8.06 True Books. Keep true books of record and account in which full, true and
correct entries will be made of all of its dealings and transactions, and set up
on its books such reserves as may be required by Generally Accepted Accounting
Principles with respect to doubtful accounts and all taxes, assessments,
charges, levies and claims and with respect to its business in general, and
include such reserves in interim as well as year-end financial statements.
8.07 Year 2000 Compliance. The Borrower will promptly notify the Agent and the
Lenders in the event the Borrower discovers or determines that any computer
application (including those affected by information received from its suppliers
and vendors) that is material to its or any of its Subsidiaries business and
operations will not be Year 2000 Compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a Material
Adverse Effect.
8.08 Right of Inspection. Permit the Agent and any Lender and accountants,
attorneys or other consultants designated by the Agent and any Lender at the
Agent or any Lender's expense to visit and inspect any of the properties,
corporate books and financial reports of the Borrower and its Subsidiaries, and
to discuss their respective affairs, finances and accounts with their principal
executive officers and independent certified public accountants, all at times
reasonably convenient to the Borrower, at reasonable intervals and with
reasonable prior notice. Subject to Section 12.17, the Agent and each Lender and
such accountants, attorneys or other consultants shall treat all information
received by it pursuant to this Section as confidential to the extent such
information is not generally available to other Persons and shall, at the
request of Borrower, execute a confidentiality agreement.
8.9 Observe all Laws. Conform to and duly observe in all material respects all
laws, rules and regulations and all other valid requirements of any regulatory
authority with respect to the conduct of its business where the failure to
comply would be reasonably expected to result in a Material Adverse Effect.
8.10 Officer's Knowledge of Default. Observe all Laws. Upon the President, Chief
Financial Officer or the Controller of the Borrower obtaining actual knowledge
of any Default or Event of Default hereunder or under any other obligation of
the Borrower or any Subsidiary described in Section 10.01(e), cause such officer
or an Authorized Representative to promptly notify the Agent of the nature
thereof, the period of existence thereof, and what action the Borrower proposes
to take with respect thereto.
8.11 Suits or Other Proceedings. Upon the President, Chief Financial Officer or
the Controller of the Borrower obtaining actual knowledge of any litigation or
other proceedings being instituted against the Borrower or any Subsidiary, or
any attachment, levy, execution or other process being instituted against any
assets of the Borrower or any Subsidiary, in an aggregate amount greater than
$500,000 not otherwise covered by insurance, promptly deliver to the Agent
written notice thereof stating the nature and status of such litigation,
dispute, proceeding, levy, execution or other process.
8.12 Notice of Discharge of Hazardous Material or Environmental Compliant.
Promptly provide to the Agent true, accurate and complete copies of any and all
notices, complaints, orders, directives, claims, or citations received by the
Borrower or any Subsidiary relating to any material (a) violation or alleged
violation by the Borrower or any Subsidiary of any applicable Environmental Laws
or OSHA; (b) release or threatened release by the Borrower or any Subsidiary of
any Hazardous Material, except where occurring legally; or (c) liability or
alleged liability of the Borrower or any Subsidiary for the costs of cleaning
up, removing, remediating or responding to a release of Hazardous Materials.
8.13 Environmental Compliance. If the Borrower or any Subsidiary shall receive
notice from any governmental authority that the Borrower or any Subsidiary has
violated any applicable Environmental Laws, the Borrower shall to the extent
required by law and after expiration of all valid appeals and administrative
proceedings (and in any event within the time period permitted by the applicable
governmental authority) remove or remedy, or cause the applicable Subsidiary to
remove or remedy, such violation.
8.14 Indemnification. The Borrower hereby agrees to defend, indemnify and hold
the Agent and each Lender harmless from and against any and all claims, losses,
liabilities, damages and expenses (including, without limitation, cleanup costs
and reasonable attorneys' fees) arising directly or indirectly from, out of or
by reason of the handling, storage, treatment, emission or disposal of any
Hazardous Material by or in respect of the Borrower or any Subsidiary or
property owned or leased or operated by the Borrower or any Subsidiary. The
provisions of this Section 8.14 shall survive repayment of the Obligations,
occurrence of the Revolving Credit Termination Date and expiration or
termination of this Agreement.
8.15 Further Assurances. At its cost and expense, upon request of the Agent,
duly execute and deliver or cause to be duly executed and delivered, to the
Agent such further instruments, documents, certificates, financing and
continuation statements, and do and cause to be done such further acts that may
be reasonably necessary or advisable in the reasonable opinion of the Agent to
carry out more effectively the provisions and purposes of this Agreement and the
other Loan Documents.
8.16 ERISA Requirement. Comply in all material respects with all requirements of
ERISA applicable to it and furnish to the Agent as soon as possible and in any
event (i) within thirty (30) days after the Borrower knows or has reason to know
that any reportable event with respect to any employee benefit plan subject to
Title IV of ERISA maintained by the Borrower or any Subsidiary which could
reasonably be expected to give rise to termination or the imposition of any
material tax or penalty has occurred, written statement of an Authorized
Representative describing in reasonable detail such reportable event and any
action which the Borrower or applicable Subsidiary proposes to take with respect
thereto, together with a copy of the notice of such reportable event given to
the Pension Benefit Guaranty Corporation ("PBGC") or a statement that said
notice will be filed with the annual report of the United States Department of
Labor with respect to such plan if such filing has been authorized, (ii)
promptly after receipt thereof, a copy of any notice that the Borrower or any
Subsidiary may receive from the PBGC relating to the intention of the PBGC to
terminate any employee benefit plan or plans of the Borrower or any Subsidiary
or to appoint a trustee to administer any such plan which could reasonably be
expected to result in a Material Adverse Effect, and (iii) within 10 days after
a filing with the PBGC pursuant to Section 412(n) of the Code of a notice of
failure to make a required installment or other payment with respect to a plan,
a certificate of an Authorized Representative setting forth details as to such
failure and the action that the Borrower or its affected Subsidiary, as
applicable, proposes to take with respect thereto, together with a copy of such
notice given to the PBGC.
8.17 Continued Operations. Continue at all times (i) to conduct its business and
engage principally in a line or lines of business involving the furnishing of
personnel related services, and (ii) preserve, protect and maintain free from
Liens its material patents, copyrights, licenses, trademarks, trademark rights,
trade names, trade name rights, trade secrets and know-how necessary or useful
in the conduct of its operations, except to the extent Borrower or its
Subsidiaries is otherwise permitted hereunder to dispose of assets.
8.18 Use of Proceeds. Use the proceeds of the Loans solely for the purposes
specified in Section 2.14 hereof.
<PAGE>
ARTICLE IX
Negative Covenants
Until the Obligations have been paid and satisfied in full and this Agreement
has been terminated in accordance with the terms hereof, unless the Required
Lenders shall otherwise consent in writing, the Borrower will not, nor will it
permit any Subsidiary to:
9.01 Consolidated Leverage Ratio. Permit at the end of each fiscal quarter the
Consolidated Leverage Ratio to exceed 3.00 to 1.00.
9.02 Consolidated Fixed Charge Ratio. Permit at the end of each fiscal quarter
the Consolidated Fixed Charge Ratio to be less than 1.50 to 1.00.
9.03 Consolidated Capitalization Ratio. Permit at any time the Consolidated
Capitalization Ratio to exceed .50 to 1.00.
9.04 Indebtedness. Incur, create, assume or permit to exist any Indebtedness,
howsoever evidenced, except
(a) Indebtedness existing as of the date hereof and as set forth in
Schedule 9.04 attached hereto and incorporated herein by reference and any
refinancings, renewals or extensions (including substitutions or
replacement of properties by newly acquired properties) thereof and
containing covenants no more restrictive than those contained in this
Agreement and providing no increase in the amount of such Indebtedness;
(b) the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
(c) Indebtedness arising under this Agreement;
(d) additional unsecured Indebtedness of the Borrower or Guarantors, or
both, in an aggregate outstanding amount not to exceed at any time 20% of
Consolidated Shareholders Equity;
(e) Capital Leases and purchase money Indebtedness described in Section
9.07 not to exceed at any time an aggregate outstanding principal amount of
$20,000,000; and
(f) additional unsecured Indebtedness of Subsidiaries which are not
Guarantors in an aggregate outstanding amount not to exceed $5,000,000.
For purposes of determining the amount of Indebtedness incurred in
connection with an Acquisition, any Indebtedness which under Generally
Accepted Accounting Principles must be recorded as a liability on the
consolidated balance sheet of the Borrower, whether or not constituting a
Contingent Obligation or Indebtedness for Money Borrowed, shall be deemed
Indebtedness at 100% of the amount thereof for purposes of this Section
9.04, and to the extent such Indebtedness is not so required to be recorded
as a liability, it shall not be deemed Indebtedness for purposes of this
Section 9.04. Indebtedness incurred under clause (d) above may be secured
by Letters of Credit issued pursuant to Article III hereof.
9.05 Transfer of Assets. Sell, lease, transfer or otherwise dispose of (i) any
interest in any Subsidiary, or (ii) any other asset of Borrower or any
Subsidiary except (a) assets sold in the ordinary course of business, (b) assets
which are worn out, obsolete or no longer necessary, (c) sales of accounts
receivable to Receivable Subsidiaries so long as such Receivable Subsidiary is a
Guarantor, (d) a transfer by the Borrower or a Subsidiary of assets to a
Guarantor or the Borrower or (e) other assets in any Fiscal Year having an
aggregate book value not exceeding 5% of Consolidated Total Assets; provided,
however, that the Borrower and its Subsidiaries may sell for cash other assets
in excess of 5% of Consolidated Total Assets so long as the net proceeds of such
sale are used to permanently reduce the Total Revolving Credit Commitment
pursuant to Section 2.08(a).
9.06 Investments;Acquisitions. Purchase, own, invest in or otherwise Acquire,
directly or indirectly, any stock or other securities or all or substantially
all of the assets, or make or permit to exist any interest whatsoever in any
other Person or permit to exist any loans or advances to any Person; provided,
Borrower and its Subsidiaries may maintain investments or invest in or Acquire
(i) Eligible Securities;
(ii) investments existing as of the date hereof and as set forth in
Schedule 7.01(d) attached hereto;
(iii) accounts receivable arising and trade credit granted in the ordinary
course of business and any securities received in satisfaction or partial
satisfaction thereof in connection with accounts of financially troubled
Persons to the extent reasonably necessary in order to prevent or limit
loss;
(iv) Acquisitions so long as (A) the Acquisition is not opposed by the
Person who is being acquired or whose assets are being acquired, (B) the
Cost of Acquisition of any Person does not exceed ten percent (10%) of
Consolidated Shareholders' Equity and (C) if the Person or assets so
acquired on a pro forma historical basis as at the date of the Acquisition
or for the Four-Quarter Period most recently ended preceding the date of
Acquisition owned assets or generated income, which when consolidated with
the assets and pre-tax income of the Borrower and its Subsidiaries,
constitute ten percent (10%) or more of the Consolidated Total Assets or
Consolidated Pre-Tax Income, then the Borrower shall furnish to the Agent
prior to completing such Acquisition a certificate in the form of Exhibit
J, which certificate demonstrates that on a pro forma historical basis no
Default or Event of Default exists under this Agreement;
(v) loans and advances to and investments in Subsidiaries so long as loans
and advances to and investments in all Subsidiaries which are not
Guarantors do not exceed at any time an aggregate of $50,000,000; provided,
however, that nothing contained in this Section shall limit the right of
Borrower and its Subsidiaries to make payments in the ordinary course of
business on behalf of customers of Borrower or its Subsidiaries rendering
temporary staffing services (the private label business) where payments
by recipients of such staffing services from such customers of Borrower or
its Subsidiaries are remitted directly to the Borrower or its Subsidiaries;
(vi) loans and advances to and investments in Persons who are not
Subsidiaries so long as (i) such Person derives the majority of its
revenues from providing staffing, consulting and outsourcing services, and
(ii) such loans and advances to and investments in such Persons do not
exceed at any time an aggregate of $5,000,000;
(vii) Investments as of the Closing Date in the form of ownership of the
capital stock in a Subsidiary;
(viii) guarantees of any Indebtedness (that is permitted by Section 9.04
hereof) of a Guarantor; and
(ix) loans and advances to employees of the Borrower and its Subsidiaries
(including bridge and relocation loans) made in the ordinary course of
business in an amount not to exceed $500,000 in the aggregate outstanding
at one time.
9.07 Liens. Incur, create or permit to exist any pledge, Lien, charge or other
encumbrance of any nature whatsoever with respect to any property or assets of
the Borrower or any Subsidiary to secure Indebtedness owed to any other Person
except:
(i) Permitted Liens; and
(ii) purchase money Liens to secure Indebtedness and Liens securing Capital
Leases to the extent permitted under Section 9.04(e) which Indebtedness is
incurred to purchase fixed assets, provided such Indebtedness represents
not less than 75% of the purchase price of such assets as of the date of
purchase thereof and no property other than the assets so purchased secures
such Indebtedness.
9.08 Restricted Payments. Make Restricted Payments during the term of this
Agreement in an aggregate amount exceeding $200,000,000, provided, however, that
the Borrower shall not make any Restricted Payment if either prior to or after
giving effect to such Restricted Payment a Default or Event of Default shall
exist, provided that in no event shall capital stock of the Borrower owned by
Borrower and its Subsidiaries represent at any time 25% or more of Consolidated
Shareholders Equity.
9.09 Merger or Consolidation. (a) Consolidate with or merge into any other
Person, or (b) permit any other Person to merge into it; or (c) other than as
permitted in Section 9.05, liquidate, wind-up or dissolve or sell, transfer or
lease or otherwise dispose of all or a substantial part of its assets (other
than sales in the ordinary course of business); provided, however, (i) any
Subsidiary of the Borrower may merge or transfer all or substantially all of its
assets into or consolidate with any wholly-owned Subsidiary of the Borrower,
(ii) any Person may merge with the Borrower or a wholly-owned Subsidiary if the
Borrower or such Subsidiary shall be the survivor thereof and such merger shall
not cause, create or result in the occurrence on any Default or Event of Default
hereunder.
9.10 Change in Control. Cause, suffer or permit any Person or group of Persons
acting in concert other than the owners, if any, of more than 35% of outstanding
securities of the Borrower as of the Closing Date having voting rights in the
election of directors, to own or control, directly or indirectly, more than 35%
of the outstanding securities of (on a fully diluted basis and taking into
account any outstanding securities or contract rights exercisable, exchangeable
or convertible into equity interests) the Borrower having voting rights in the
election of directors.
9.11 Transactions with Affiliates. Enter into any transaction after the date
hereof, including, without limitation, the purchase, sale, leasing or exchange
of property, real or personal, or the rendering of any service, with any
Affiliate of the Borrower (other than a Subsidiary), except (a) where such
transaction is upon fair and reasonable terms that are no less favorable to the
Borrower or any Subsidiary than would be obtained in an arm's length transaction
with a nonaffiliated Person, (b) in the ordinary course of and pursuant to the
reasonable requirements of the Borrower's (or any Subsidiary's) business
consistent with past practice of the Borrower and its Subsidiaries, (c)
investments permitted by clause (ix) of Section 9.06, and (d) the payment of
reasonable compensation (including the granting of stock options for the
purchase of Borrower's capital stock and payment of cash) to the directors of
the Borrower.
9.12 ERISA. With respect to all employee pension benefit plans maintained by the
Borrower or any Subsidiary:
(i) terminate any of such employee pension benefit plans so as to incur any
material liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA;
(ii) allow or suffer to exist any prohibited transaction involving any of
such employee pension benefit plans or any trust created thereunder which
would subject the Borrower or a Subsidiary to any material tax or penalty
or other liability on prohibited transactions imposed under Internal
Revenue Code Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit plan any
contribution which it is obligated to pay under the terms of such plan
which could reasonably be expected to have a Material Adverse Effect;
(iv) allow or suffer to exist any accumulated funding deficiency, whether
or not waived, with respect to any such employee pension benefit plan which
could reasonably be expected to have a Material Adverse Effect;
(v) allow or suffer to exist any occurrence of a reportable event or any
other event or condition, which presents a material risk of termination by
the Pension Benefit Guaranty Corporation of any such employee pension
benefit plan that is a Single Employer Plan, which termination could result
in any liability to the Pension Benefit Guaranty Corporation which could
reasonably be expected to have a Material Adverse Effect; or
(vi) incur any withdrawal liability with respect to any Multi-employer Plan
which could reasonably be expected to have a Material Adverse Effect.
9.13 Fiscal Year. Change its Fiscal Year.
9.14 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with the merger or
consolidation of Subsidiaries into each other or into the Borrower permitted
pursuant to Section 9.09.
9.15 Rate Hedging Obligations. Incur any Rate Hedging Obligations or enter into
any agreements, arrangements, devices or instruments relating to Rate Hedging
Obligations, except pursuant to a Swap Agreement.
9.16 Negative Pledge Clauses. Enter into or cause, suffer or permit to exist any
agreement with any Person other than the Agent and the Lenders pursuant to this
Agreement or any other Loan Document which prohibits or limits the ability of
any of the Borrower or any Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues whether now owned or
hereafter acquired.
<PAGE>
ARTICLE X
Events of Default and Acceleration
10.01 Events of Default. If any one or more of the following events (herein
called "Events of Default") shall occur for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of any Loan, Reimbursement Obligation or other Obligation, when
and as the same shall be due and payable whether pursuant to any provision
of Article II or ArticleIII hereof, at maturity, by acceleration or
otherwise; or
(b) if default shall be made in the due and punctual payment of any amount
of interest on any Loan, Reimbursement Obligation or of any fees or other
amounts payable to any of the Lenders under the Loan Documents on the date
on which the same shall be due and payable and such default shall continue
for a period of three (3) Business Days; or
(c) if default shall be made in the performance or observance of any
covenant set forth in Sections 8.06, 8.08, 8.10 or Article IX hereof
(except that in the case of Sections 9.04, 9.06(i), 9.07 and 9.11 such
default shall continue for a period of ten (10) days after the occurrence
thereof);
(d) if a default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in this
Agreement or the Notes (other than as described in clauses (a), (b) or (c)
above) and such default shall continue for 30 or more days after the
earlier of receipt of notice of such default by the Authorized
Representative from the Agent or the Borrower becomes aware of such
default, or if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in any
of the other Loan Documents (beyond any applicable grace period, if any,
contained therein) or in any instrument or document delivered to the Agent
or the Lenders in connection with or pursuant to this Agreement or any of
the Obligations evidencing or creating any obligation or guaranty in favor
of the Agent or any of the Lenders, or if any Loan Document ceases to be in
full force and effect (other than by reason of any action by the Agent), or
if without the written consent of the Required Lenders, this Agreement or
any other Loan Document shall be disaffirmed or shall terminate, be
terminable or be terminated or become void or unenforceable for any reason
whatsoever (other than in accordance with its terms in the absence of
default or by reason of any action by the Agent or the Lenders); or
(e) if a default shall occur, which is not waived, (i)in the payment of
any principal, interest, premium or other amounts with respect to any
Indebtedness (other than the Loans) of the Borrower or of any Subsidiary in
an amount not less than $5,000,000 in the aggregate outstanding, or (ii)in
the performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which any
such Indebtedness may have been issued, created, assumed, guaranteed or
secured by the Borrower or any Subsidiary, and such default shall continue
for more than the period of grace, if any, therein specified, or if such
default shall permit the holder of any such Indebtedness to accelerate the
maturity thereof; or
(f) if any representation, warranty or other statement of fact contained
herein or any other Loan Document or in any writing, certificate, report or
statement at any time furnished to the Agent or any of the Lenders by or on
behalf of the Borrower or any Guarantor pursuant to or in connection with
this Agreement or the other Loan Documents, or otherwise, shall be false or
misleading in any material respect when given; or
(g) if the Borrower or any Subsidiary shall be unable to pay its debts
generally as they become due; file a petition to take advantage of any
insolvency statute; make an assignment for the benefit of its creditors;
commence a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or any substantial part
of its property; file a petition or answer seeking reorganization or
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator
of the Borrower or any Subsidiary or of the whole or any substantial part
of its properties and such order, judgment or decree continues unstayed and
in effect for a period of sixty (60) days, or approve a petition filed
against the Borrower or any Subsidiary seeking reorganization or
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of America or any
state, which petition is not dismissed within sixty (60) days; or if, under
the provisions of any other law for the relief or aid of debtors, a court
of competent jurisdiction shall assume custody or control of the Borrower
or any Subsidiary or of the whole or any substantial part of its
properties, which control is not relinquished within sixty (60) days; or if
there is commenced against the Borrower or any Subsidiary any proceeding or
petition seeking reorganization, arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state which proceeding or petition remains
undismissed for a period of sixty (60) days; or if the Borrower or any
Subsidiary takes any action to indicate its consent to or approval of any
such proceeding or petition; or
(i) if (i) any judgment where the amount not covered by insurance (or the
amount as to which the insurer denies liability) is in excess of $5,000,000
is rendered against the Borrower or any Subsidiary, or (ii)there is any
attachment, injunction or execution against any of the Borrower's or any
Subsidiary's properties for any amount in excess of $5,000,000; and such
judgment, attachment, injunction or execution has not been either paid,
stayed, discharged, bonded or dismissed for a period of thirty (30) days;
or
(j) if the Borrower or any Subsidiary shall, other than in the ordinary
course of business (as determined by past practices), suspend all or any
part of its operations material to the conduct of the business of the
Borrower or such Subsidiary, taken as a whole;
then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be taken: (i)the
Agent, with the consent of the Required Lenders may, and at the
direction of the Required Lenders shall, declare any obligation of the
Lenders and NationsBank to make further Loans or issue Letters of
Credit or make Swing Line Loans terminated, whereupon the obligation
of the Lenders to make further Loans or issue Letters of Credit
hereunder shall terminate immediately, and (ii)the Agent shall, at
the direction of the Required Lenders declare by notice to the
Borrower any or all of the Obligations to be immediately due and
payable, and the same, including all interest accrued thereon and all
other obligations of the Borrower to the Lenders, shall forthwith
become immediately due and payable without presentment, demand,
protest, notice or other formality of any kind, all of which are
hereby expressly waived, anything contained herein or in any
instrument evidencing the Obligations to the contrary notwithstanding;
provided, however, that notwithstanding the above, if there shall
occur an Event of Default under clause (g) or (h) above, then the
obligation of the Lenders to make Loans, of NationsBank to make Swing
Line Loans and to issue Letters of Credit hereunder shall
automatically terminate and any and all of the Obligations shall be
immediately due and payable without the necessity of any action by the
Agent or the Required Lenders or notice to the Agent or the Lenders;
(B) the Borrower shall, upon demand of the Agent or the Required
Lenders, deposit cash with the Agent in accordance with the LC Account
Agreement in an amount equal to the amount of any Letters of Credit
remaining undrawn or unpaid, as collateral security for the repayment
of any future drawings or payments under such Letters of Credit and
the Borrower shall forthwith deposit and pay such amounts and such
amounts shall be held by the Agent pursuant to the terms of the LC
Account Agreement;
(C) the Agent and each of the Lenders shall have all of the rights and
remedies available under the Loan Documents or under any applicable
law.
10.02 Agent to Act. In case any one or more Events of Default shall occur and
not have been waived, the Agent may, and at the direction of the Required
Lenders shall, proceed to protect and enforce its rights or remedies either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
10.03 Cumulative Rights. No right or remedy herein conferred upon the Agent is
intended to be exclusive of any other rights or remedies contained herein or in
any other Loan Document, and every such right or remedy shall be cumulative and
shall be in addition to every other such right or remedy contained herein and
therein or now or hereafter existing at law or in equity or by statute, or
otherwise.
10.04 No Waiver. No course of dealing between the Borrower and any Lender or the
Agent or any failure or delay on the part of any Lender or the Agent in
exercising any rights or remedies under any Loan Document or otherwise available
to it shall operate as a waiver of any rights or remedies and no single or
partial exercise of any rights or remedies shall operate as a waiver or preclude
the exercise of any other rights or remedies hereunder or of the same right or
remedy on a future occasion.
10.05 Allocation of Proceeds. If an Event of Default has occurred and not been
waived, and the maturity of the Notes has been accelerated pursuant to Article X
hereof, all payments received by the Agent hereunder, in respect of any
principal of or interest on the Obligations or any other amounts payable by the
Borrower hereunder, shall be applied by the Agent in the following order:
(a) amounts due to the Lenders pursuant to Sections 2.12, 4.03, 4.04 and
12.05;
(b) amounts due to the Agent pursuant to Section 11.08;
(c) payments of interest on Loans, Swing Line Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the Lenders (with
amounts payable in respect of Swing Line Outstandings being included in
such calculation and paid to NationsBank);
(d) payments of principal of Loans, Swing Line Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the Lenders (with
amounts payable in respect of Swing Line Outstandings being included in
such calculation and paid to NationsBank);
(e) payments of cash amounts to the Agent in respect of outstanding Letters
of Credit pursuant to Section 10.01(B);
(f) amounts due to the Lenders pursuant to Sections 3.02(f) and 8.14;
(g) payments of all other amounts due under any of the Loan Documents, if
any, to be applied for the ratable benefit of the Lenders;
(h) amounts due to any of the Lenders in respect of Obligations consisting
of liabilities under any Swap Agreement with any of the Lenders on a pro
rata basis according to the amounts owed; and
(i) any surplus remaining after application as provided for herein, to the
Borrower or otherwise as may be required by applicable law.
<PAGE>
ARTICLE XI
The Agent
11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes the Agent to act as its agent under this Agreement and
the other Loan Documents with such powers and discretion as are specifically
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Agent (which term as used in this sentence and in Section 11.05 and the
first sentence of Section 11.06 hereof shall include its affiliates and the
Agent's and its affiliates' officers, directors, employees, and agents): (a)
shall not have any duties or responsibilities except those expressly set forth
in this Agreement and shall not be a trustee or fiduciary for any Lender; (b)
shall not be responsible to the Lenders for any recital, statement,
representation, or warranty (whether written or oral) made in or in connection
with any Loan Document or any certificate or other document referred to or
provided for in, or received by any of them under, any Loan Document, or for the
value, validity, effectiveness, genuineness, enforceability, or sufficiency of
any Loan Document, or any other document referred to or provided for therein or
for any failure by any Loan Party or any other Person to perform any of its
obligations thereunder; (c) shall not be responsible for or have any duty to
ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Loan Party or the satisfaction of any condition
or to inspect the property (including the books and records) of any Loan Party
or any of its Subsidiaries or affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted to be taken by it
under or in connection with any Loan Document, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
11.02 Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telecopy) believed by it to be
genuine and correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Loan Party), independent accountants, and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until the Agent
receives and accepts an Assignment and Acceptance executed in accordance with
Section 12.01 hereof. As to any matters not expressly provided for by this
Agreement, the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding on all of the
Lenders; provided, however, that the Agent shall not be required to take any
action that exposes the Agent to personal liability or that is contrary to any
Loan Document or applicable law or unless it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking any such action.
11.03 Defaults. The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to Section 11.02 hereof) take such action with respect to such
Default or Event of Default as shall reasonably be directed by the Required
Lenders, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
11.04 Rights as Lender. With respect to its Revolving Credit Commitment and the
Loans made by it, NationsBank (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. NationsBank
(and any successor acting as Agent) and its affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, make
investments in, provide services to, and generally engage in any kind of
lending, trust, or other business with any Loan Party or any of its Subsidiaries
or affiliates as if it were not acting as Agent, and NationsBank (and any
successor acting as Agent) and its affiliates may accept fees and other
consideration from any Loan Party or any of its Subsidiaries or affiliates for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the Agent (to the extent
not reimbursed under Section 12.05 hereof, but without limiting the obligations
of the Borrower under such Section) ratably in accordance with their respective
Commitments, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys'
fees), or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Agent (including by any Lender) in any
way relating to or arising out of any Loan Document or the transactions
contemplated thereby or any action taken or omitted by the Agent under any Loan
Document; provided that no Lender shall be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of the
Person to be indemnified. Without limitation of the foregoing, each Lender
agrees to reimburse the Agent promptly upon demand for its ratable share of any
costs of expenses payable by the Borrower under Section 12.05, to the extent
that the Agent is not promptly reimbursed for such costs and expenses by the
Borrower. The agreements contained in this Section shall survive payment in full
of the Loans and all other amounts payable under this Agreement.
11.06 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has,
independently and without reliance on the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of the Loan Parties and their Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any Loan
Party or any of its Subsidiaries or affiliates that may come into the possession
of the Agent or any of its affiliates.
11.07 Resignation of Agent. The Agent may resign at any time by giving notice
thereof to the Lenders and the Borrower. Upon any such resignation, the Required
Lenders may appoint, with the consent of the Borrower, so long as there shall
not have occurred and be continuing a Default or Event of Default, which consent
shall not be unreasonably withheld, a successor Agent for the Lenders. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article XI shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
11.08 Fees. The Borrower agrees to pay to the Agent, for its individual account,
an annual Agent's fee as from time to time agreed to by the Borrower and Agent
in writing.
11.09 Other Agents. None of the Lenders identified on the cover of this
Agreement as a Co-Syndication Agent or the Documentation Agent shall have
any right, power, obligation, liability, responsibility or duty under this
Agreement or any other Loan Document other than those applicable to all Lenders
as such. Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified in deciding to enter into this Agreement or any
other Loan Document or in taking or refraining from taking any action hereunder
or thereunder or pursuant hereto or thereto.
<PAGE>
ARTICLE XII
Miscellaneous
12.01 Assignments and Participation. (a) Each Lender may assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Loans, its
Notes, and its Revolving Credit Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least
equal to $10,000,000 or an integral multiple of $1,000,000 in excess
thereof;
(iii) each such assignment by a Lender shall be of a constant, and not
varying, percentage of all of its rights and obligations under this
Agreement and the Notes; and
(iv) the parties to such assignment shall execute and deliver to the
Agent for its acceptance an Assignment and Acceptance in the form of
Exhibit B hereto, together with any Notes subject to such assignment
and a processing fee of $3,500 to be paid by the new Lender.
Upon execution, delivery, and acceptance of such Assignment and Acceptance,
the assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender
hereunder and the assigning Lender shall, to the extent of such assignment,
relinquish its rights and be released from its obligations under this
Agreement. Upon the consummation of any assignment pursuant to this
Section, the assignor, the Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor and
the assignee. If the assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the
Borrower and the Agent certification as to exemption from withholding of
Taxes in accordance with Section4.06.
(b) The Agent shall maintain at its address referred to in Section12.02 a
copy of each Assignment and Acceptance delivered to and accepted by it and
a register for the recordation of the names and addresses of the Lenders
and the Revolving Credit Commitment of, and principal amount of the
Revolving Credit Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Agent and
the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall
be available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Notes subject to such assignment and
payment of the processing fee, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit B
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Revolving Credit Commitment
and its Revolving Credit Loans); provided, however, that (i) such Lenders
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, and (iii) the Borrower shall continue to
deal solely and directly with such Lender in connection with such Lenders
rights and obligations under this Agreement, and such Lender shall retain
the sole right to enforce the obligations of the Borrower relating to its
Loans and its Note and to approve any amendment, modification, or waiver of
any provision of this Agreement (other than amendments, modifications, or
waivers decreasing the amount of principal of or the rate at which interest
is payable on such Loans, Note or Letter of Credit, or any fee payable
hereunder, extending any scheduled principal payment date or date fixed for
the payment of interest on such Loans, Note or Letter of Credit, or
extending the expiry date of any Letter of Credit beyond the Maturity Date,
or any date for reimbursement of any Reimbursement Obligations or extending
its Commitment).
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may, at no cost to the Borrower, at any time assign and pledge all
or any portion of its Loans and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release the
assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 12.17 hereof
(g) The Borrower may not assign any rights, powers, duties or obligations
under this Agreement or the other Loan Documents without the prior written
consent of all the Lenders.
12.02 Notices. Any notice shall be conclusively deemed to have been received by
any party hereto and be effective on the day on which delivered to such party
(against receipt therefor) at the address set forth below or such other address
as such party shall specify to the other parties in writing (or, in the case of
telephonic notice or notice by telecopy, telegram or telex (where the receipt of
such message is verified by return) expressly provided for hereunder, when
received during normal business hours at such telephone, telecopy or telex
number as may from time to time be specified in written or oral notice to the
other parties hereto or otherwise received), or by overnight courier or express
mail on the day following the date sent, addressed to such party at said
address:
(a) if to the Borrower:
Modis Professional Services, Inc.
One Independent Drive
Jacksonville, Florida 32202
Attention: Chief Financial Officer
Telephone: (904) 360-2000
Telefacsimile: (904) 360-2505
(b) if to the Lender:
NationsBank, National Association
400 N. Ashley Drive
Tampa, Florida 33602
Attention: Global Finance
Telephone: (813) 224-5194
Telefacsimile: (813) 224-5948
with a copy to:
NationsBank, National Association
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
(c) if to NationsBank in its capacity as Agent and issuer of the Letters of
Credit:
NationsBank, National Association
101 North Tryon Street, 15th Floor
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
12.03 Right of Setoff; Adjustments. (a) Upon the occurrence and during the
continuance of any Event of Default, each Lender (and each of its affiliates) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender (or any of its affiliates) to or for the credit or
the account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under this Agreement and the Notes held by
such Lender, irrespective of whether such Lender shall have made any demand
under this Agreement or such Notes and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans owing to it, or interest thereon, such
benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loans
owing to it, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be rescinded,
and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from a Lender pursuant to this Section12.03
may, to the fullest extent permitted by law, exercise all of its rights of
payment (including the right of set-off) with respect to such participation
as fully as if such Person were the direct creditor of the Borrower in the
amount of such participation.
12.04 Survival. All covenants, agreements, representations and warranties made
herein shall survive the making by the Lenders of the Loans and the expiration
of the Letters of Credit and the execution and delivery to the Lenders of this
Agreement and the Notes and shall continue in full force and effect so long as
any of Obligations remain outstanding or any Lender has any commitment hereunder
or the Borrower has continuing obligations hereunder unless otherwise provided
herein. Whenever in this Agreement, any of the parties hereto is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party and all covenants, provisions and agreements by or on behalf of
the Borrower which are contained in this Agreement, the Notes and the other Loan
Documents shall inure to the benefit of the successors and permitted assigns of
the Lenders or any of them.
12.05 Expenses. The Borrower agrees (a)to pay or reimburse the Agent for all
its reasonable and customary out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation and execution of, this Agreement or
any of the other Loan Documents (including travel expenses relating to closing),
and the consummation of the transactions contemplated hereby and thereby,
including, without limitation, the reasonable and customary fees and
disbursements of counsel to the Agent as well as all such expenses and costs
arising in connection with any amendment, supplement or modification to this
Agreement or any other Loan Documents, (b)to pay or reimburse the Agent and the
Lenders for all their reasonable costs and expenses incurred in connection with
the enforcement (only from and after the occurrence and continuation of a
Default or Event of Default) or preservation of any rights under this Agreement
and the other Loan Documents, including without limitation, the reasonable fees
and disbursements of its counsel, (c)to pay, indemnify and hold the Agent and
the Lenders harmless from any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any failure to pay or delay in
paying, documentary, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of this Agreement or any other Loan Documents, or consummation of any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Agreement or any other Loan Documents, and (d)to pay,
indemnify, and hold the Agent and the Lenders harmless from and against any and
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any indemnity
agreement or undertaking made by the Agent or any Lender to facilitate the
processing of checks, payroll or otherwise, of Borrower, or in any respect
relating to the transactions contemplated hereby or thereby, (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that the
Borrower shall have no obligation hereunder with respect to indemnified
liabilities arising from (i) the willful misconduct or gross negligence of or
the willful breach of the Loan Documents by the party seeking indemnification,
(ii) legal proceedings commenced against the Agent or any Lender by any security
holder or creditor thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such, (iii) any taxes
imposed upon the Agent or any Lender other than the documentary, stamp, excise
and similar taxes described in clause (c) above or any tax which would be
payable to Lender by Borrower pursuant to Article IV hereof, it being understood
that the Lenders shall have the affirmative obligation, so long as no Default or
Event of Default exists hereunder, to take all reasonable steps to ensure such
documentary, stamp or similar taxes are not required to be paid, (iv)taxes
imposed and costs and expenses incurred as a result of a transfer or assignment
of any Note, participation or assignment of a portion of a Lender's rights or
(v)any transfer taxes, costs, fees or expenses incurred in connection with any
transfer of the Notes. The agreements in this subsection shall survive repayment
of the Notes and all other Obligations hereunder and termination of this
Agreement.
12.06 Amendments and Waivers. Any provision of this Agreement or any other Loan
Document may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Lenders (and, if
Article XI or the rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall, unless signed by all
the Lenders (i) increase the Revolving Credit Commitments of the Lenders, (ii)
reduce the principal of or rate of interest on any Loan or any fees or other
amounts payable hereunder, (iii) postpone any date fixed for the payment of any
scheduled installment of principal of or interest on any Loan or any fees or
other amounts payable hereunder or for termination of any Revolving Credit
Commitment, (iv) change the percentage of the Revolving Credit Commitments or of
the unpaid principal amount of the Notes, or the number of Lenders, which shall
be required for the Lenders or any of them to take any action under this Section
or any other provision of this Agreement or (v) release all or substantially all
of the Guarantors; and provided, further, that no such amendment or waiver which
affects the rights, privileges or obligations of NationsBank as provider of the
Swing Line or issuer of Letters of Credit, shall be effective unless signed in
writing by NationsBank.
12.07 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
12.08 Waivers by Borrower. In any litigation in any court with respect to, in
connection with, or arising out of this Agreement, the Loans, any of the Notes,
any of the other Loan Documents, the Obligations, or any instrument or document
delivered pursuant to this Agreement or the other Loan Documents, or the
validity, protection, interpretation, collection or enforcement thereof, or any
other claim or dispute howsoever arising between the Borrower and the Agent and
any Lender, the Borrower and the Agent and the Lenders hereby waive, to the
extent permitted by applicable law, trial by jury in connection with any such
litigation.
12.09 Termination. The termination of this Agreement shall not affect any rights
of the Borrower, the Agent or the Lenders or any obligation of the Borrower, the
Agent or the Lenders, arising prior to the effective date of such termination,
and the provisions hereof shall continue to be fully operative until all
transactions entered into or rights created or obligations incurred prior to
such termination have been fully disposed of, concluded or liquidated and the
Obligations arising prior to or after such termination have been irrevocably
paid in full. The rights granted to the Agent for the benefit of the Lenders
hereunder and under the other Loan Documents shall continue in full force and
effect, notwithstanding the termination of this Agreement, until all of the
Obligations have been paid in full after the termination hereof (other than
Obligations in the nature of continuing indemnities or expense reimbursement
obligations not yet due and payable) or the Borrower has furnished the Agent and
the Lenders with an indemnification satisfactory to the Lender with respect
thereto. All representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof until payment in full of the
Obligations unless otherwise provided herein. Notwithstanding the foregoing, if
after receipt of any payment of all or any part of the Obligations, any Lender
is for any reason compelled to surrender such payment to any Person because such
payment is determined to be void or voidable as a preference, impermissible
setoff, a diversion of trust funds or for any other reason, this Agreement shall
continue in full force and the Borrower shall be liable to, and shall indemnify
and hold such Lender harmless for, the amount of such payment surrendered until
the Lenders shall have been finally and irrevocably paid in full. The provisions
of the foregoing sentence shall be and remain effective notwithstanding any
contrary action which may have been taken by the Lender in reliance upon such
payment, and any such contrary action so taken shall be without prejudice to the
Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
12.10 Replacement Lender. The Borrower may, in its sole discretion, on 10
Business Days' prior written notice to the Agent and the affected Lender, cause
such Lender to (and such Lender shall) assign, pursuant to Section 12.01, all of
its rights and obligations under this Agreement (other than with respect to
outstanding Competitive Bid Loans) to an Eligible Assignee designated by the
Borrower which is willing to become a Lender for a purchase price equal to the
outstanding principal amount of the Loans payable to such Lender plus any
accrued but unpaid interest on such Loans, any accrued but unpaid fees with
respect to such Lender's Revolving Credit Commitment and any other amount
payable to such Lender under this Agreement (other than with respect to
outstanding Competitive Bid Loans); provided, that any expenses or other amounts
which would be owing to such Lender pursuant to any indemnification provision
hereof (including, if applicable Section 4.04) shall be payable by the Borrower
as if the Borrower had prepaid the Loans of such Lender rather than such Lender
having assigned its interest hereunder. The Borrower or the Assignee shall pay
the applicable processing fee under Section 12.01(a).
12.11 Governing Law. All documents executed pursuant to the transactions
contemplated herein, including, without limitation, this Agreement and each of
the Loan Documents shall be deemed to be contracts made under, and for all
purposes shall be construed in accordance with, the internal laws and judicial
decisions of the State of Florida. The Borrower and the Agent hereby submit to
the jurisdiction and venue of the state and federal courts of Florida for the
purposes of resolving disputes hereunder or for the purposes of collection.
12.12 Headings and References. The headings of the Articles and Sections of this
Agreement are inserted for convenience of reference only and are not intended to
be a part of, or to affect the meaning or interpretation of this Agreement.
Words such as "hereof", "hereunder", "herein" and words of similar import shall
refer to this Agreement in its entirety and not to any particular Section or
provisions hereof, unless so expressly specified. As used herein, the singular
shall include the plural, and the masculine shall include the feminine or a
neutral gender, and vice versa, whenever the context requires.
12.13 Severability. If any provision of this Agreement or the other Loan
Documents shall be determined to be illegal or invalid as to one or more of the
parties hereto, then such provision shall remain in effect with respect to all
parties, if any, as to whom such provision is neither illegal nor invalid, and
in any event all other provisions hereof shall remain effective and binding on
the parties hereto.
12.14 Entire Agreement. This Agreement, together with the other Loan Documents,
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
12.15 Agreement Controls. In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any term of this Agreement,
the terms and provisions of this Agreement shall control.
12.16 Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged under any of the Notes, including all charges or
fees in connection therewith deemed in the nature of interest under applicable
law shall not exceed the Highest Lawful Rate (as such term is defined below). If
the rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate (as defined below),
the outstanding amount of the Loans made hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals the
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect. In
addition, if when the Loans made hereunder are repaid in full the total interest
due hereunder (taking into account the increase provided for above) is less than
the total amount of interest which would have been due hereunder if the stated
rates of interest set forth in this Agreement had at all times been in effect,
then to the extent permitted by law, the Borrower shall pay to the Agent an
amount equal to the difference between the amount of interest paid and the
amount of interest which would have been paid if the Highest Lawful Rate had at
all times been in effect. Notwithstanding the foregoing, it is the intention of
the Lenders and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Lender contracts for, charges, or receives any consideration
which constitutes interest in excess of the Highest Lawful Rate, then any such
excess shall be canceled automatically and, if previously paid, shall at such
Lender's option be applied to the outstanding amount of the Loans made hereunder
or be refunded to the Borrower. As used in this paragraph, the term "Highest
Lawful Rate" means the maximum lawful interest rate, if any, that at any time or
from time to time may be contracted for, charged, or received under the laws
applicable to such Lender which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate than applicable laws now
allow.
12.17 Confidentiality. The Agent and each Lender (each, a "Lending Party")
agrees to keep confidential any information furnished or made available to it by
the Borrower pursuant to this Agreement that is marked confidential; provided
that nothing herein shall prevent any Lending Party from disclosing such
information (a) to any other Lending Party or any affiliate of any Lending
Party, or any officer, director, employee, agent, or advisor of any Lending
Party or affiliate of any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Lending Party other than as a result of a disclosure by
any Lending Party prohibited by this Agreement or through disclosure by any
other Person whom the Agent or such Lender has reason to believe disclosed such
information in violation of or contrary to the confidentiality requirements or
policies of the Borrower or a Subsidiary, (g) in connection with any litigation
to which such Lending Party or any of its affiliates may be a party, (h) to the
extent necessary in connection with the exercise of any remedy under this
Agreement or any other Loan Document, and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made,
executed and delivered by their duly authorized officers as of the day and year
first above written.
MODIS PROFESSIONAL SERVICES, INC.
WITNESS:
/s/ Charles N. Anderson By: /s/ Michael D. Abney
Name: Michael D. Abney
/s/ Terry L. Witcher Title: Senior Vice President & Treasurer
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent
By:/s/ Miles C. Dearden III
Name: Miles C. Dearden III
Title: Senior Vice President
NATIONSBANK, NATIONAL ASSOCIATION,
as a Lender
By:/s/ Miles C. Dearden III
Name: Miles C. Dearden III
Title: Senior Vice President
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Michael J. Carlin
Name: Michael J. Carlin
Title: Senior Vice President
Lending Office:
225 Water Street, 4th Floor
Mail Code FL0060
Jacksonville, Florida 32202
Wire Transfer Instructions:
First Union National Bank
Jacksonville, Florida
ABA No.: 063000021
Account No.: 145916-2008
Account Name: Commercial Loan Services
Attention: Cindy Petry
(904) 489-1823
Reference: Modis Professional Services, Inc.
<PAGE>
FLEET NATIONAL BANK
By: /s/ Deborah Lawrence
Name: Deborah Lawrence
Title: Senior Vice President
Lending Office:
One Federal Street
MAOF DO4J
Boston, Massachusetts 02110
Wire Transfer Instructions:
Fleet National Bank
Boston, Massachusetts
ABA No.: 011000138
Account No.: 151035103156
Account Name: Commercial Loan Services
Reference: AccuStaff/Modis
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Gaye C. Plunkett
Name: Gaye C. Plunkett
Title: Vice President
Lending Office:
One First National Plaza
Suite 0324, 10th Floor
Chicago, Illinois 60670
Wire Transfer Instructions:
The First National Bank of Chicago
Chicago, Illinois
ABA No.: 071000013
Account No.: 4811528600000
Account Name: Loan Processing Department
Attention: Nan Wilson
Reference: Modis Professional Services, Inc.
<PAGE>
WACHOVIA BANK, N.A.
By: /s/ Tammy F. Hughes
Name: Tammy F. Hughes
Title: Vice President
Lending Office:
191 Peachtree Street, N.E., 29th Floor
Atlanta, Georgia 30303
Wire Transfer Instructions:
Wachovia Bank, N.A.
ABA No.:
Account No.:
Attention:
Reference: Modis Professional Services, Inc.
<PAGE>
KBC BANK N.V.
By: /s/ Robert Snauffer /s/ Marcel Claes
Name: Robert Snauffer Marcel Claes
Title:First Vice President Deputy General Manager
Lending Office:
125 West 55th Street
New York, New York 10019
Wire Transfer Instructions:
Bank of New York
ABA No.: 021-000-018
Name of Account:KBC Bank N.V.,New York Branch
Account No.: 802 301 5618
Reference: Modis Professional Services, Inc.
<PAGE>
MARINE MIDLAND BANK
By: /s/ Jeremy P. Bollington
Name: Jeremy P. Bollington
Title: Vice President
Lending Office:
140 Broadway, 4th Floor
New York, New York 10005-1196
Wire Transfer Instructions:
Marine Midland Bank
ABA No.: 021-001-088
Account No.: 001-940-503
Account Name: Commercial Loans
Reference: Modis Professional Services, Inc.
Attention: Asset Syndications
<PAGE>
HIBERNIA NATIONAL BANK
By: /s/ Christopher Pitre
Name: Christopher Pitre
Title: Vice President
Lending Office:
313 Carondelet Street
New Orleans, Louisiana 70130
Wire Transfer Instructions:
Hibernia National Bank
New Orleans, Louisiana
ABA No.: 065000090
Account No.: 0520-36615
Account Name: National Accounts
Reference: Modis Professional Services, Inc.
<PAGE>
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By: /s/ Warren R. Ross
Name: Warren R. Ross
Title: Assistant Vice President
Lending Office:
333 Clay Street
Suite 3400
Houston, Texas 77002
Wire Transfer Instructions:
BNP New York
New York, New York
ABA No.: 026007689
Account No.: 141011-001-69
Attention: Donna Rose
Reference: Modis Professional Services, Inc.
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ Kazuo Iida
Name: Kazuo Iida
Title: General Manager
Lending Office:
191 Peachtree Street, N.E.
Suite 3600
Atlanta, Georgia 30303-1757
Wire Transfer Instructions:
The Industrial Bank of Japan, Limited,
New York Branch
ABA No.: 026008345
For further credit to: IBJ Atlanta Agency
Account No.: 2601-21014
Reference: Modis Professional Services, Inc.
<PAGE>
COMERICA BANK
By: /s/ Martin G. Ellis
Name: Martin G. Ellis
Title: Vice President
Lending Office:
500 Woodward Avenue, 9th Floor
MC 3280
Detroit, Michigan 48275-3280
Wire Transfer Instructions:
Comerica Bank
ABA No.: 072000096
Account Name: International L/Cs
Account No.: 02-26045-94100
Reference: Modis Professional Services, Inc.
<PAGE>
PARIBAS
By: /s/ Duane Helkowski
Name: Duane Helkowski
Title: Vice President
By: /s/ Sean Reddington
Name: Sean Reddington
Title: Vice President
Lending Office:
787 Seventh Avenue
New York, New York 10019
Wire Transfer Instructions:
Bankers Trust NY
ABA No.: 021-000-033
Account No.: Paribas NY
Attention: Loan Servicing
Reference: Modis Professional Services, Inc.
<PAGE>
BANK HAPOALIM B.M.
By:/s/ Peter Dovas /s/ Carl Kopfinger
Name: Peter Dovas Carl Kopfinger
Title: Vice President Vice President
Lending Office:
1515 Market Street
Suite 200
Philadelphia, Pennsylvania 19102
Wire Transfer Instructions:
Federal Reserve Bank of Philadelphia
Account: Bank Hapoalim B.M.
ABA No.: 036001581
Attention: Linda OConnor
Reference: Modis Professional Services, Inc.
<PAGE>
2
FIFTH AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
THIS FIFTH AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT is made and entered
into as of March 31, 1999, and effective as of January 1, 1999 (the 'Fifth
Amendment'), by and between MODIS PROFESSIONAL SERVICES, INC., (formerly
AccuStaff Incorporated) a Florida corporation (the 'Employer') and DEREK E.
DEWAN, a resident of the State of Florida (the 'Executive').
WHEREAS, the Employer and the Executive entered into an Employment
Agreement dated December 31, 1993, as amended by the First Amendment dated as of
December 31, 1993 (the'First Amendment'), the Second Amendment dated as of
August 24, 1995, and effective as of January 26, 1995 (the 'Second Amendment')
the Third Amendment dated as of August 24, 1995 (the 'Third Amendment'), and the
Fourth Amendment dated as of March, 1996 (the 'Fourth Amendment), (such
Employment Agreement, as amended by the First, Second, Third and Fourth
Amendments, is herein collectively referred to as the'Agreement');
WHEREAS, in recognition of the Executive's outstanding performance and
record of achievement to date as President and Chief Executive Officer, the
Employer wishes to increase Executive's salary.
WHEREAS, Employer wishes to clarify that Executive's incentive bonus shall
be calculated based upon a year to year increase in net income from 'operating
earnings'.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants, and subject to the terms and conditions contained in this Fifth
Amendment, the Employer and the Executive, intending to be legally bound, hereby
agree as follows (unless otherwise indicated, all capitalized terms herein shall
have the same meaning ascribed to them in the Agreement).
1. RECITALS CORRECT. The above recitals are true and correct and are by
this reference incorporated in and made a part of this Fifth Amendment.
2. BASE SALARY. Paragraph 4.A. of the Agreement is hereby amended by
deleting the amount '$350,000' from the first line thereof and substituting the
amount '$500,000.'
3. The first sentence of Paragraph 4.B. of the Agreement is hereby amended
to read as follows: Additional Compensation (the'Incentive Compensation') equal
to four percent (4%) of growth (increase) in net income from operating earnings
(before state and federal income and franchise taxes) of Employer (on a
consolidated basis) for each fiscal year ( or part thereof) of Employer during
the Employment Period.
4. AGREEMENT VALID. Except as modified hereby, the Agreement shall remain
valid and binding upon the Employer and the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement as of March
31, 1999, effective as of January 1, 1999.
MODIS PROFESSIONAL SERVICES, INC.
By:__________________________________
T. Wayne Davis
Chairman, Compensation Committee
MODIS PROFESSIONAL SERVICES, INC.
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS 1
ARTICLE II
THE PLANS
2.1 Name 5
2.2 Purpose 5
2.3 Effective Time 5
ARTICLE III
PARTICIPANTS 5
ARTICLE IV
ADMINISTRATION 5
4.1 Duties and Powers of the Committee 5
4.2 Interpretation; Rules 6
4.3 No Liability 6
4.4 Majority Rule 6
4.5 Company Assistance 6
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN 7
5.1 Limitations 7
5.2 Anti-dilution 7
5.3 Per-Employee Limitation 9
ARTICLE VI
OPTIONS 9
6.1 Types of Options Granted 9
6.2 Option Grant and Agreement 9
6.3 Optionee Limitations 9
6.4 $100,000 Limitation 10
6.5 Exercise Price 10
6.6 Exercise Period 10
6.7 Option Exercise 10
6.8 Reload Options 12
6.9 Nonassignability and Nontransferability of Options 12
6.10 Termination of Employment or Service 12
6.11 Employment Rights 13
6.12 Certain Successor Options 13
6.13 Effect of Change of Control 13
ARTICLE VII
RESTRICTED STOCK 13
7.1 Awards of Restricted Stock 13
7.2 Non-Transferability 14
7.3 Lapse of Restrictions 14
7.4 Termination of Employment 14
7.5 Treatment of Dividends 14
7.6 Delivery of Shares 14
ARTICLE VIII
STOCK CERTIFICATES 15
ARTICLE IX
TERMINATION AND AMENDMENT 15
9.1 Termination and Amendment 15
9.2 Effect on Grantee's Rights 16
ARTICLE X
RELATIONSHIP TO OTHER COMPENSATION PLANS 16
ARTICLE XI
MISCELLANEOUS 16
11.1 Replacement or Amended Grants 16
11.2 Forfeiture for Competition 16
11.3 Plan Binding on Successors 16
11.4 Singular, Plural; Gender 17
11.5 Headings, etc., No Part of Plan 17
11.6 Interpretation 17
MODIS PROFESSIONAL SERVICES, INC.
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
"Award" shall mean a grant of Restricted Stock.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean theft or destruction of property of the Company, a Parent, or
a Subsidiary, disregard of Company rules or policies, or conduct evincing
willful or wanton disregard of the interests of the Company. Such determination
shall be made by the Committee based on information presented by the Company and
the Employee and shall be final and binding on all parties hereto.
"Change in Control" shall mean the occurrence of either of the following events:
(i) A change in the composition of the Board of Directors as a result
of which fewer than one-half of the incumbent directors are
directors who either:
(A) Had been directors of the Company 24 months prior to such
change; or
(B) Were elected, or nominated for election, to the Board of Directors
with the affirmative votes of at least a majority of the directors who
had been directors of the Company 24 months prior to such change
and who were still in office at the time of the election or
nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act), other than any person who is a shareholder of
the Company on or before the effective date of the Plan, by the
acquisition or aggregation of Securities is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing 50 percent or more of the combined voting
power of the Company's then outstanding securities ordinarily (and
apart from rights accruing under special circumstances) having the
right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter in such person's
ownership of securities, shall be disregarded until such person
increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company.
"Code" shall mean the United States Internal Revenue Code of 1986, including
effective date and transition rules (whether or not codified). Any reference
herein to a specific section of the Code shall be deemed to include a reference
to any corresponding provision of future law.
"Committee" shall mean a committee of at least two directors appointed from time
to time by the Board, having the duties and authority set forth herein in
addition to any other authority granted by the Board; provided, however, that
with respect to any Options or Awards granted to an individual who is also a
Section 16 Insider, the Committee shall consist of at least two Directors (who
need not be members of the Committee with respect to Options or Awards granted
to any other individuals) who are both Non-employee Directors within the meaning
of Rule 16b-3 of the Exchange Act and Outside Directors within the meaning of
Code Section 162(m), and all authority and discretion shall be exercised by such
Directors, and references herein to the "Committee" shall mean such Directors
insofar as any actions or determination of the Committee shall relate to or
affect Options or Awards made to or held by any Section 16 Insider. At any time
that the Board shall not have appointed a committee as described above, any
reference herein to the Committee shall mean a reference to the Board.
"Company" shall mean Modis Professional Services, Inc.
"Director" shall mean a member of the Board and any person who is an advisory or
honorary director of the Company if such person is considered a director for the
purposes of Section 16 of the Exchange Act, as determined by reference to such
Section 16 and to the rules, regulations, judicial decisions, and interpretative
or "no-action" positions with respect thereto of the Securities and Exchange
Commission, as the same may be in effect or set forth from time to time.
"Employee" shall mean an employee of the Employer.
"Employer" shall mean the corporation that employs a Grantee.
"Exchange Act" shall mean the Securities Exchange Act of 1934. Any reference
herein to a specific section of the Exchange Act shall be deemed to include a
reference to any corresponding provision of future law.
"Exercise Price" shall mean the price at which an Optionee may purchase a share
of Stock under a Stock Option Agreement.
"Fair Market Value" on any date shall mean (i) the closing sales price of the
Stock, regular way, on such date on the national securities exchange having the
greatest volume of trading in the Stock during the thirty-day period preceding
the day the value is to be determined or, if such exchange was not open for
trading on such date, the next preceding date on which it was open; (ii) if the
Stock is not traded on any national securities exchange, the average of the
closing high bid and low asked prices of the Stock on the over-the counter
market on the day such value is to be determined, or in the absence of closing
bids on such day, the closing bids on the next preceding day on which there were
bids; or (iii) if the Stock also is not traded on the over-the-counter market,
the fair market value as determined in good faith by the Board or the Committee
based on such relevant facts as may be available to the Board, which may include
opinions of independent experts, the price at which recent sales have been made,
the book value of the Stock, and the Company's current and future earnings.
"Grantee" shall mean a person who is an Optionee or a person who has received
an Award of Restricted Stock.
"Incentive Stock Option" shall mean an option to purchase any stock of the
Company, which complies with and is subject to the terms, limitations and
conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
"Officer" shall mean a person who constitutes an officer of the Company for the
purposes of Section 16 of the Exchange Act, as determined by reference to such
Section 16 and to the rules, regulations, judicial decisions, and interpretative
or "no-action" positions with respect thereto of the Securities and Exchange
Commission, as the same may be in effect or set forth from time to time.
"Option" shall mean an option, whether or not an Incentive Stock Option, to
purchase Stock granted pursuant to the provisions of Article VI hereof.
"Optionee" shall mean a person to whom an Option has been granted hereunder.
"Parent" shall mean any corporation (other than the Employer) in an unbroken
chain of corporations ending with the Employer if, at the time of the grant (or
modification) of the Option, each of the corporations other than the Employer
owns stock possessing 50 percent or more of the total combined voting power of
the classes of stock in one of the other corporations in such chain.
"Permanent and Total Disability" shall have the same mean as given to that term
by Code Section 22(e)(3) and any regulations or rulings promulgated thereunder.
"Plan" shall mean the Modis Professional Services, Inc. Amended and Restated
1995 Stock Option Plan, the terms of which are set forth herein.
"Purchasable" shall refer to Stock which may be purchased by an Optionee under
the terms of this Plan on or after a certain date specified in the applicable
Stock Option Agreement.
"Qualified Domestic Relations Order" shall have the meaning set forth in the
Code or in the Employee Retirement Income Security Act of 1974, or the rules
and regulations promulgated under the Code or such Act.
"Reload Option" shall have the meaning set forth in Section 6.8 hereof.
"Restricted Stock" shall mean Stock issued, subject to restrictions, to a
Grantee pursuant to Article VII hereof.
"Restriction Agreement" shall mean the agreement setting forth the terms of an
Award, and executed by a Grantee as provided in Section 7.1 hereof.
"Section 16 Insider" shall mean any person who is subject to the provisions of
Section 16 of the Exchange Act, as provided in Rule 16a-2 promulgated pursuant
to the Exchange Act.
"Stock" shall mean the Common Stock, par value $.01 per share, of the Company
or, in the event that the Outstanding shares of Stock are hereafter changed into
or exchanged for shares of a different stock or securities of the Company or
some other entity, such other stock or securities.
"Stock Option Agreement" shall mean an agreement between the Company and an
Optionee under which the Optionee may purchase Stock hereunder, a sample form
of which is attached hereto as Exhibit A (which form may be varied by the
Committee in granting an Option).
"Subsidiary" shall mean any corporation (other than the Employer) in an unbroken
chain of corporations beginning with the Employer if, at the time of the grant
(or modification) of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name This Plan shall be known as the Modis Professional Services, Inc.
Amended and Restated 1995 Stock Option Plan.
2.2 Purpose. The purpose of the Plan is to advance the interests of the Company,
its Subsidiaries and its shareholders by affording certain employees (including
employees who are also Directors) of the Company and its Subsidiaries an
opportunity to acquire or increase their proprietary interests in the Company.
The objective of the issuance of the Options and Awards is to promote the growth
and profitability of the Company and its Subsidiaries because the Grantees will
be provided with an additional incentive to achieve the Company's objectives
through participation in its success and growth and by encouraging their
continued association with or service to the Company.
2.3 Effective Date. The Plan shall become effective on August 24, 1995;
provided, however, that the Plan shall terminate, and all Options or Awards
theretofore granted or awarded shall become void and may not be exercised, on
August 24, 1996, if the shareholders of the Company shall not by that date have
approved the Plan's adoption.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist of all
persons whose participation in the Plan the Committee determines to be in the
best interests of the Company which shall include all employees (including
employees who are also Directors), including but not limited to, executive
personnel of the Company or any Subsidiary.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered by the
Committee. The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it may determine. The
Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written consent in lieu of a
meeting, and to meet telephonically. In administering the Plan, the Committee's
actions and determinations shall be binding on all interested parties. The
Committee shall have the power to grant Options or Awards in accordance with the
provisions of the Plan and may grant Options and Awards singly, in combination,
or in tandem. Subject to the provisions of the Plan, the Committee shall have
the discretion and authority to determine those individuals to whom Options or
Awards will be granted and whether such Options shall be accompanied by the
right to receive Reload Options, the number of shares of Stock subject to each
Option or Award, such other matters as are specified herein, and any other terms
and conditions of a Stock Option Agreement or Restriction Agreement. The
Committee shall also have the discretion and authority to delegate to any
Officer its powers to grant Options or Awards under the Plan to any person who
is an employee of the Company but not an Officer or Director. To the extent not
inconsistent with the provisions of the Plan, the Committee may give a Grantee
an election to surrender an Option or Award in exchange for the grant of a new
Option or Award, and shall have the authority to amend or modify an outstanding
Stock Option Agreement or Restriction Agreement, or to waive any provision
thereof, provided that the Grantee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of the Plan, the
Committee also shall have complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable for the administration of the Plan,
including, without limitation, the amending or altering of the Plan and any
Options or Awards granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of the
Committee shall be liable to any person for any act or determination made in
good faith with respect to the
Plan or any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall constitute a
quorum, and any action taken by a majority at a meeting at which a quorum is
present, or any action taken without a meeting evidenced by a writing executed
by all the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and timely information to
the Committee on all matters relating to eligible persons, their employment,
death, retirement, disability, or other termination of employment, and such
other pertinent facts as the Committee may require. The Company shall furnish
the Committee with such clerical and other assistance as is necessary in the
performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any anti-dilution adjustment pursuant to the
provisions of Section 5.2 hereof, for the Company's 1998 fiscal year, the
maximum number of shares of stock that may be issued hereunder shall be
20,000,000. Notwithstanding the foregoing, the aggregate number of shares of
Stock that may be issued upon exercise of Incentive Stock Options shall not
exceed 20,000,000 Shares (subject to any anti-dilution adjustment pursuant to
the provisions of Section 5.2 hereof). Any or all shares of Stock subject to the
Plan may be issued in any combination of Incentive Stock Options, Non-Incentive
Stock Options or Restricted Stock. Shares subject to an Option issued as an
Award may be either authorized and unissued shares or shares issued and later
acquired by the Company. The shares covered by any unexercised portion of an
Option that is terminated for any reason (except as set forth in the following
paragraph), or any forfeited portion of an Award, may then be optioned or
awarded under the Plan, and such shares shall not be considered as having been
optioned or issued in computing the number of shares of Stock remaining
available for option or award hereunder.
If Options are issued in respect of options to acquire stock of any entity
acquired, by merger or otherwise, by the Company (or any Subsidiary of the
Company), to the extent that such issuance shall not be inconsistent with the
terms, limitations and conditions of Code section 422 or Rule 16b-3 under the
Exchange Act, the aggregate number of shares of Stock for which Options may be
granted hereunder shall automatically be increased by the number of shares
subject to the Options so issued; provided, however, that the aggregate number
of shares of Stock for which Options may be granted hereunder shall
automatically be decreased by the number of shares covered by any unexercised
portion of an Option so issued that has terminated for any reason, and the
shares subject to any such unexercised portion may not be optioned to any other
person.
5.2 Anti-dilution.
(a) If the outstanding shares of Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of merger, consolidation, reorganization, recapitalization, reclassification,
combination or exchange of shares, stock split or stock dividend, if any
spin-off, spin-out or other distribution of assets materially affects the price
of the Company's stock, or if any assumption and conversion to the Plan by the
Company of an acquired company's outstanding option grants then:
(i) the aggregate number and kind of shares of Stock for which Options or
Awards may be granted hereunder shall be adjusted proportionately by the
Committee; and
(ii) the rights of Optionees (concerning the number of shares subject to
Options and the Exercise Price) under outstanding Options and the rights
of the holders of Awards (concerning the terms and conditions of the lapse
of any then-remaining restrictions), shall be adjusted proportionately by
the Committee.
(b) If the Company shall be a party to any reorganization in which it does not
survive, involving merger, consolidation, or acquisition of the stock or
substantially all the assets of the Company, the Committee, in its discretion,
may:
(i) notwithstanding other provisions hereof, declare that all Options granted
under the Plan shall become exercisable immediately notwithstanding the
provisions of the respective Stock Option Agreements regarding exercisability,
that all such Options shall terminate 30 days after the Committee gives written
notice of the immediate right to exercise all such options and of the decision
to terminate all Options not exercised within such 30 day period, and that all
then-remaining restrictions pertaining to Awards under the Plan shall
immediately lapse; and/or
(ii) notify all Grantees that all Options or Awards granted under the Plan shall
be assumed by the successor corporation or substituted on an equitable basis
with options or restricted stock issued by such successor corporation.
(c) If the Company is to be liquidated or dissolved in connection with a
reorganization described in Section 5.2(b), the provisions of such Section shall
apply. In all other instances, the adoption of a plan of dissolution or
liquidation of the Company shall, notwithstanding other provisions hereof, cause
all then-remaining restrictions pertaining to Awards under the Plan to lapse,
and shall cause every Option outstanding under the Plan to terminate to the
extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the shareholders, provided that, notwithstanding other provisions
hereof, the Committee may declare all Options granted under the Plan to be
exercisable at any time on or before the fifth business day following such
adoption notwithstanding the provisions of the respective Stock Option
Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of this Section 5.2,
and the manner of their application, shall be determined solely by the
Committee, and any such adjustment may provide for the elimination of fractional
share interests; provided, however, that any adjustment made by the Board or the
Committee shall be made in a manner that will not cause an Incentive Stock
Option to be other than an Incentive Stock Option under applicable statutory and
regulatory provisions. The adjustments required under this Article V shall apply
to any successors of the Company and shall be made regardless of the number or
type of successive events requiring such adjustments.
5.3 Per-Employee Limitation. Subject to any antidilution adjustment pursuant to
the provisions of Section 5.2 hereof, the maximum number of shares of Stock in
any combination of Incentive Stock Options, non-Incentive Stock Options,
Restricted Stock that may be issued hereunder to any one Employee in any given
fiscal year shall be 2,000,000 in fiscal years 1995 and 1996 and 500,000 in all
fiscal years thereafter.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan, grant either
Incentive Stock Options or Options which do not qualify as Incentive Stock
Options. Within the limitations provided in this Plan, both types of Options may
be granted to the same person at the same time, or at different times, under
different terms and conditions, as long as the terms and conditions of each
Option are consistent with the provisions of the Plan. Without limitation of the
foregoing, Options may be granted subject to conditions based on the financial
performance of the Company or any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall be evidenced
by a written Stock Option Agreement executed by the Company and the Optionee.
The terms of the Option, including the Option's duration, time or times of
exercise, exercise price, whether the Option is intended to be an Incentive
Stock Option, and whether the Option is to be accompanied by the right to
receive a Reload Option, shall be stated in the Stock Option Agreement. No
Incentive Stock Option may be granted more than ten years after the earlier to
occur of the effective date of the Plan or the date the Plan is approved by the
Company's shareholders.
Separate Stock Option Agreements may be used for Options intended to be
Incentive Stock Options and those not so intended, but any failure to use such
separate agreements shall not invalidate, or otherwise adversely affect the
Optionee's interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an Incentive Stock
Option to any person who, at the time the Incentive Stock Option is granted:
(a) is not an employee of the Company or any of its Subsidiaries; or
(b) owns or is considered to own stock possessing at least 10% of the total
combined voting power of all classes of stock of the Company or any of its
Parent or Subsidiary corporations; provided, however, that this limitation shall
not apply if at the time an Incentive Stock Option is granted the Exercise Price
is at least 110% of the Fair Market Value of the Stock subject to such Option
and such Option by its terms would not be exercisable after five years from the
date on which the Option is granted. For the purpose of this subsection (b), a
person shall be considered to own: (i) the stock owned, directly or indirectly,
by or for his or her brothers and sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; (ii) the stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust in proportion
to such person's stock interest, partnership interest or beneficial interest
therein; and (iii) the stock which such person may purchase under any
outstanding options of the Employer or of any Parent or Subsidiary of the
Employer.
6.4 $100,000 Limitation. Except as provided below, the Committee shall not grant
an Incentive Stock Option to, or modify the exercise provisions of outstanding
Incentive Stock Options held by, any person who, at the time the Incentive Stock
Option is granted (or modified), would thereby receive or hold any Incentive
Stock Options of the Employer and any Parent or Subsidiary of the Employer, such
that the aggregate Fair Market Value (determined as of the respective dates of
grant or modification of each option) of the stock with respect to which such
Incentive Stock Options are exercisable for the first time during any calendar
year is in excess of $100,000 (or such other limit as may be prescribed by the
Code from time to time); provided that the foregoing restriction on modification
of outstanding Incentive Stock Options shall not preclude the Committee from
modifying an outstanding Incentive Stock Option if, as a result of such
modification and with the consent of the Optionee, such Option no longer
constitutes an Incentive Stock Option; and provided that, if the $100,000
limitation (or such other limitation prescribed by the Code) described in this
Section 6.4 is exceeded, the Incentive Stock Option, the granting or
modification of which resulted in the exceeding of such limit, shall be treated
as an Incentive Stock Option up to the limitation and the excess shall be
treated as an Option not qualifying as an Incentive Stock Option.
6.5 Exercise Price. The exercise Price of the Stock subject to each Option shall
be determined by the Committee. Subject to the provisions of Section 6.3(b)
hereof, the Exercise Price of an Incentive Stock Option shall not be less than
100% of the Fair Market Value of the Stock as of the date the Option is granted
(or in the case of an Incentive Stock Option that is subsequently modified, on
the date of such modification). The Exercise Price of a non Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Stock on the
date the Option is granted.
6.6 Exercise Period. The period for the exercise of each Option granted
hereunder shall be determined by the Committee, but the Stock Option Agreement
with respect to each Option intended to be an Incentive Stock Option shall
provide that such Option shall not be exercisable after the expiration of ten
years from the date of grant (or modification) of the Option. In addition, no
Option granted to a Section 16 Insider shall be exercisable prior to the
expiration of six months from the date such Option is granted, other than in the
case of the death or disability of the Optionee, and no Option shall be
exercisable prior to shareholder approval of the Plan.
6.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option Agreement or Section 6.6
hereof, an Option may be exercised at any time or from time to time during the
term of the Option as to any or all full shares which have become Purchasable
under the provisions of the Option, but not at any time as to less than 100
shares unless the remaining shares that have become so Purchasable are less than
100 shares. The Committee shall have the authority to prescribe in any Stock
Option Agreement that the Option may be exercised only in accordance with a
vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at its principal
office a written notice of exercise with respect to a specified number of shares
of Stock and (ii) payment to the Company at that office of the full amount of
the Exercise Price for such number of shares in accordance with Section 6.7(c).
If requested by an Optionee, an Option may be exercised with the involvement of
a stockbroker in accordance with the federal margin rules set forth in
Regulation T (in which case the certificates representing the underlying shares
will be delivered by the Company directly to the stockbroker).
(c) The Exercise Price is to be paid in full in cash upon the exercise of the
Option and the Company shall not be required to deliver certificates for the
shares purchased under such payment has been made; provided, however, that in
lieu of cash, all or any portion of the Exercise Price may be paid by tendering
to the Company shares of Stock duly endorsed for transfer and owned by the
Optionee, or by authorization to the Company to withhold shares of Stock
otherwise issuable upon exercise of the Option, in each case to be credited
against the Exercise Price at the Fair Market Value of such shares on the date
of exercise (however, no fractional shares may be so transferred, and the
Company shall not be obligated to make any cash payments in consideration of any
excess of the aggregate Fair Market Value of shares transferred over the
aggregate Exercise Price); provided further, that the Board may provide in a
Stock Option Agreement (or may otherwise determine in its sole discretion at the
time of exercise) that, in lieu of cash or shares, all or a portion of the
Exercise Price may be paid by the Optionee's execution of a recourse note equal
to the Exercise Price or relevant portion thereof, subject to compliance with
applicable state and federal laws, rules and regulations.
(d) In addition to and at the time of payment of the Exercise Price, the
Optionee shall pay to the Company in cash the full amount of any federal, state,
and local income, employment, or other withholding taxes applicable to the
taxable income of such Optionee resulting from such exercise; provided, however,
that in the discretion of the Committee any Stock Option Agreement may provide
that all or any portion of such tax obligations, together with additional taxes
not exceeding the actual additional taxes to be owed by the Optionee as a result
of such exercise, may, upon the irrevocable election of the Optionee, be paid by
tendering to the Company whole shares of Stock duly endorsed for transfer and
owned by the Optionee, or by authorization to the Company to withhold shares of
Stock otherwise issuable upon exercise of the Option, in either case in that
number of shares having a Fair Market Value on the date of exercise equal to the
amount of such taxes thereby being paid, and subject to such restrictions as to
the approval and timing of any such election as the Committee may from time to
time determine to be necessary or appropriate to satisfy the conditions of the
exemption set forth in Rule 16b-3 under the Exchange Act, if such rule is
applicable.
(e) The holder of an Option shall not have any of the rights of a shareholder
with respect to the shares of Stock subject to the Option until such shares have
been issued and transferred to the Optionee upon the exercise of the Option.
6.8 Reload Options.
(a) The Committee may specify in a Stock Option Agreement (or may otherwise
determine in its sole discretion) that a Reload Option shall be granted, without
further action of the Committee, (i) to an Optionee who exercises an Option
(including a Reload Option) by surrendering shares of Stock in payment of
amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for the same number
of shares as are surrendered to pay such amounts, (iii) as of the date of such
payment and at an Exercise Price equal to the Fair Market Value of the Stock on
such date, and (iv) otherwise on the same terms and conditions as the Option
whose exercise has occasioned such payment, except as provided below and subject
to such other contingencies, conditions, or other terms as the Committee shall
specify at the time such exercised Option is granted; provided, that the shares
surrendered in payment as provided above must have been held by the Optionee for
at least six months prior to such surrender.
(b) Unless provided otherwise in the Stock Option Agreement, a Reload Option may
not be exercised by an Optionee (i) prior to the end of a one-year period from
the date that the Reload Option is granted, and (ii) unless the Optionee retains
beneficial ownership of the shares of Stock issued to such Optionee upon
exercise of the Option referred to above in Section 6.8(a)(i) for a period of
one year from the date of such exercise.
6.9 Nonassignability and Nontransferability of Options.
(a) Except as provided in Paragraph 6.9(b), no Option under the Plan shall be
assignable or transferable by an Optionee, except by will or by the laws of
descent and distribution or, in the case of non-Incentive Stock Options,
pursuant to a Qualified Domestic Relations Order. Also, except as provided in
Paragraph 6.9(b), during the life of the Optionee, such award shall be
exercisable only by such person or by such person's guardian or legal
representative.
(b) Each non-Incentive Stock Option granted to an Optionee, to the extent so
provided in such Optionee's individual Stock Option Agreement by the Committee,
in its sole and absolute discretion, shall be transferable by gift to any member
of the Optionee's immediate family or to a trust for the benefit of such
immediate family member(s) and, if so transferred, shall be exercisable, solely
by the transferee in the case of such transfer by gift.
6.10 Termination of Employment or Service. The Committee shall have the power to
specify, with respect to the Options granted to a particular Optionee, the
effect upon such Optionee's right to exercise an Option of termination of such
Optionee's employment or service under various circumstance, which effect may
include immediate or deferred termination of such Optionee's Rights under an
Option, or acceleration of the date at which an Option may be exercised in full;
provided, however, that in no event may an Incentive Stock Option be exercised
after the expiration of ten years from the date of grant thereof.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option Agreement
shall confer on any person any Right to continue in the employ of the Company or
any of its Subsidiaries, or shall interfere in any way with the right of the
Company or any of its Subsidiaries
to terminate such person's employment at any time.
6.12 Certain Successor Options. To the extent not inconsistent with the terms,
limitations and conditions of Code section 422 and any regulations promulgated
with respect thereto, an Option issued in respect of an option held by an
employee to acquire stock of any entity acquired, by merger or otherwise, by the
Company (or any Subsidiary of the Company) may contain terms that differ from
those stated in this Article VI, but solely to the extent necessary to preserve
for any such employee the rights and benefits contained in such predecessor
option, or to satisfy the requirements of Code section 424(a).
6.13 Effect of Change in Control. The Committee may determine, at the time of
granting an Option or thereafter, that such Option shall become exercisable on
an accelerated basis in the event that a Change in Control occurs with respect
to the Company (and the Committee shall have the discretion to modify the
definition of a Change in Control in a particular Option Agreement). If the
Committee finds that there is a reasonable possibility that, within the
succeeding six months, a Change in Control will occur with respect to the
Company, then the Committee may determine that all outstanding Options shall be
exercisable on an
accelerated basis.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of Restricted
Stock, which shall be governed by a Restriction Agreement between the Company
and the Grantee. Each Restriction Agreement shall contain such restrictions,
terms, and conditions as the Committee may, in its discretion, determine, and
may require that an appropriate legend be placed on the certificates evidencing
the subject Restricted Stock.
Shares of Restricted Stock granted pursuant to an Award hereunder shall be
issued in the name of the Grantee as soon as reasonably practicable after the
Award is granted, provided that the Grantee has executed the Restriction
Agreement governing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the foregoing documents within any time period
prescribed by the Committee, the Award shall be void. At the discretion of the
Committee, Shares issued in connection with an Award shall be deposited together
with the stock powers with an escrow agent designated by the Committee. Unless
the Committee determines otherwise and as set forth in the Restriction
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have all of the rights of a shareholder with respect to such Shares, including
the right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
7.2 Non-Transferability. Until any restrictions upon Restricted Stock awarded to
a Grantee shall have lapsed in a manner set forth in Section 7.3, such shares of
Restricted Stock shall not be transferable other than by will or the laws of
descent and distribution, or pursuant to a Qualified Domestic Relations Order,
nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded hereunder
shall lapse at such time or times (but with respect to any award to a Grantee
who is also a Section 16 Insider, not less than six months after the date of the
Award) and on such terms and conditions as the Committee may, in its discretion,
determine at the time the Award is granted. After the grant of an Award, the
Committee may only accelerate the lapse of restrictions on an Award prior to the
end of the initial three year period following the grant of the Award (one-year
if the restrictions on the Award are based on performance) in the event of a
Change in Control, or the death, disability, or retirement of a Grantee.
7.4 Termination of Employment. The Committee shall have the power to specify,
with respect to each Award granted to any particular Grantee, the effect upon
such Grantee's rights with respect to such Restricted Stock of the termination
of such Grantee's employment under various circumstances, which effect may
include immediate or deferred forfeiture of such Restricted Stock or
acceleration of the date at which any then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted Stock is made the
Committee may, in its discretion, determine that the payment to the Grantee of
any dividends, or a specified portion thereof, declared or paid on such
Restricted Stock shall be (i) deferred until the lapsing of the relevant
restrictions and (ii) held by the Company for the account of the Grantee until
such lapsing. In the event of such deferral, there shall be credited at the end
of each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum determined by the Committee. Payment
of deferred dividends, together with interest thereon, shall be made upon the
lapsing of restrictions imposed on such Restricted Stock, and any dividends
deferred (together with any interest thereon) in respect of Restricted Stock
shall be forfeited upon any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Except as provided otherwise in Article IX below, within
a reasonable period of time following the lapse of the restrictions on shares of
Restricted Stock, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such shares and such shares shall be free of all
restrictions hereunder.
ARTICLE VIII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for shares
of Stock purchased upon the exercise of any Option granted hereunder or any
portion thereof, or deliver any certificate for shares of Restricted Stock
granted hereunder, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which the
Stock is then listed;
(b) The completion of any registration or other qualification of such shares
which the Committee shall deem necessary or advisable under any federal or state
law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any federal or state
governmental agency or body which the Committee shall determine to be necessary
or advisable; and
(d) The lapse of such reasonable period of time following the exercise of the
Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such restrictive
legends as the Company shall deem necessary or advisable pursuant to applicable
federal and state securities laws.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination and Amendment. The Board may at any time terminate the Plan, and
may at any time and from time to time and in any respect amend the Plan;
provided, however, that the Board (unless its actions are approved or ratified
by the Shareholders of the Company within twelve months of the date that the
Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable pursuant to Incentive
Stock Options under the Plan or materially increase the number of shares of
Stock subject to the Plan, in each case except as contemplated in Section 5.2
hereof;
(b) Change the class of employees eligible to receive Incentive Stock Options
that may participate in the Plan or materially change the class of persons that
may participate in the Plan; or
(c) Otherwise materially increase the benefits accruing to participants under
the Plan.
9.2 Effect on Grantee's Rights. No termination, amendment, or modification of
the Plan shall affect adversely a Grantee's rights under a Stock Option
Agreement or Restriction Agreement without the consent of the Grantee or his
legal representative.
ARTICLE X
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option, incentive, or
other compensation plans in effect for the Company or any of its Subsidiaries;
nor shall the adoption of the Plan preclude the Company or any of its
Subsidiaries from establishing any other form of incentive or other compensation
plan for employees or Directors of Company or any of its Subsidiaries.
ARTICLE XI
MISCELLANEOUS
11.1 Replacement or Amended Grants. At the sole discretion of the Committee and
subject to the terms of the Plan, the Committee may amend or modify outstanding
Options or Awards; provided however, that no modification of an Option or Award
shall adversely affect a Grantee's rights under a Stock Option Agreement or
Restriction Agreement without the consent of the Grantee or his legal
representative. Notwithstanding any other provision herein to the contrary, the
Committee may, pursuant to Section 5.2 hereof, exchange or substitute
outstanding Options or Awards or adjust the exercise price of outstanding
Options or Awards without a Grantee's consent.
11.2 Forfeiture for Competition. If a Grantee provides services to a competitor
of the Company or any of its Subsidiaries, whether as an employee, officer,
director, independent contractor, consultant, agent, or otherwise, such services
being of a nature that can reasonably be expected to involve the skills and
experience used or developed by the Grantee while an Employee, then that
Grantee's rights under any Options outstanding hereunder shall be forfeited and
terminated, and any shares of Restricted Stock held by such Grantee subject to
remaining restrictions shall be forfeited, subject in each case to a
determination to the contrary by the Committee.
11.3 Plan Binding on Successors. The Plan shall be binding upon the successors
and assigns of the Company.
11.4 Singular, Plural; Gender. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
11.5 Headings, etc., No Part of Plan. Headings of Articles and Sections hereof
are inserted for convenience and reference; they do not constitute part of the
Plan.
11.6 Interpretation. With respect to Section 16 Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the Exchange Act. To the extent any provision of the Plan
or action by the Plan administrators fails to so comply, it shall be deemed void
to the extent permitted by law and deemed advisable by the Plan administrators.
* * * * * *
JK2 142146.1
Exhibit A to Modis
Professional Services, Inc.
Incorporated Amended
and Restated 1995 Stock
Option Plan - Form of
Stock Option Agreement
MODIS PROFESSIONAL SERVICES, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this day of
_______, ______, by and between Modis Professional Services, Inc., a Florida
corporation (the "Company "), and _____________ (the "Optionee").
WHEREAS, on August 24, 1995, the Board of Directors of the Company adopted a
stock option plan known as the "Modis Professional Services, Inc. Amended and
Restated 1995 Stock Option Plan" (the "Plan"), and recommended that the Plan be
approved by the Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase the
number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written agreement
with
respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and
also in consideration of the mutual covenants contained herein, the parties
hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the provisions of
the Plan and the terms and definitions of the Plan are incorporated herein by
reference and made a part hereof. A copy of the Plan has been delivered to, and
receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock, par value $.01 per share (the "Stock"), set forth on
Schedule A attached hereto and incorporated herein by reference. The Option
shall be exercisable in the amounts and at the time specified on Schedule A. The
Option shall expire and shall not be exercisable on the date specified on
Schedule A or on such earlier date as determined pursuant to Sections 8, 9, or
10 hereof. Schedule A states whether the Option is intended to be an Incentive
Stock Option.
3. Purchase Price The price per share to be paid by the Optionee for the shares
subject to this Option (the "Exercise Price") shall be as specified on Schedule
A, which price shall be an amount not less than the Fair Market Value of a share
of Stock as of the Date of Grant (as defined in Section 11 below) if the Option
is an Incentive Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at least the lesser
of 100 shares or the number of shares of Purchasable Stock as to which the
Option remains unexercised. In the event this Option is not exercised with
respect to all or any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not exercised shall
no longer be subject to this Option.
5. Option Non-Transferable. No Option shall be transferable by an Optionee other
than by will or the laws of descent and distribution or, in the case of
non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order,
and no Option shall be transferable by an Optionee who is a Section 16 Insider
prior to shareholder approval of the Plan. During the lifetime of an Optionee,
Options shall be exercisable only by such Optionee (or by such Optionee's
guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the Optionee,
or by the Optionee's administrators, executors or personal representatives, by a
written notice (in substantially the form of the Notice of Exercise attached
hereto as Schedule B) signed by the Optionee, or by such administrators,
executors or personal representatives, and delivered or mailed to the Company as
specified in Section 14 hereof to the attention of the President or such other
officer as the Company may designate. Any such notice shall (a) specify the
number of shares of Stock which the Optionee or the Optionee's administrators,
executors or personal representatives, as the case may be, then elects to
purchase hereunder, (b) contain such information as may be reasonably required
pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or
cashier's check payable to the Company in payment of the total Exercise Price
applicable to such shares as provided herein, (ii) shares of Stock owned by the
Optionee and duly endorsed or accompanied by stock transfer powers having a Fair
Market Value equal to the total Exercise Price applicable to such shares
purchased hereunder, or (iii) a certified or cashier's check accompanied by the
number of shares of Stock whose Fair Market Value when added to the amount of
the check equals the total Exercise Price applicable to such shares purchased
hereunder. Upon receipt of any such notice and accompanying payment, and subject
to the terms hereof, the Company agrees to issue to the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, stock certificates for the number of shares specified in such notice
registered in the name of the person exercising this Option.
7. Adjustment in Option. The number of Shares subject to this Option, the
Exercise Price and other matters are subject to adjustment during the term of
this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
(a) Except as otherwise specified in Schedule A hereto, in the event of the
termination of the Optionee's employment with the Company or any of its
Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the Optionee
may exercise this Option at any time within 30 days after such termination to
the extent of the number of shares which were Purchasable hereunder at the date
of such termination.
(b) Except as specified in Schedule A attached hereto, in the event of a
termination of the Optionee's employment that is either (i) for cause or (ii)
voluntary on the part of the Optionee and without the written consent of the
Company, this Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto, in the
event of the retirement of the Optionee at the normal retirement date as
prescribed from time to time by the Company or any Subsidiary, the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee's retirement [provided that, on the date
which is three months after the date of retirement, the Options will become void
and unexercisable unless on the date of retirement the Optionee enters into a
noncompete agreement with Modis Professional Services, Inc. and continues to
comply with such noncompete agreement]. This Option does not confer upon the
Optionee any right with respect to continuance of employment by the Company or
by any of its Subsidiaries. This Option shall not be affected by any change of
employment so long as the Optionee continues to be an employee of the Company or
one of its Subsidiaries.
9. Disabled Optionee. In the event of termination of employment because of the
Optionee's becoming a Disabled Optionee, the Optionee (or his or her personal
representative) may exercise this Option at any time within three months after
such termination to the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A with respect
to the rights of the Optionee upon termination of employment under Section 8(a)
above, in the event of the Optionee's death while employed by the Company or any
of its Subsidiaries or within three months after a termination of such
employment (if such termination was neither (i) for cause nor (ii) voluntary on
the part of the Optionee and without the written consent of the Company), the
appropriate persons described in Section 6 hereof or persons to whom all or a
portion of this Option is transferred in accordance with Section 5 hereof may
exercise this Option at any time within a period ending on the earlier of (a)
the last day of the three month period following the Optionee's death or (b) the
expiration date of this Option. If the Optionee was an employee of the Company
at the time of death, this Option may be so exercised to the extent of the
number of shares that were Purchasable hereunder at the date of death. If the
Optionee's employment terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by this Option
which were Purchasable hereunder at the date of such termination.
11. Date of Grant. This Option was granted by the Board of Directors of the
Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that the
issuance of capital stock of the Company is subject to limitations imposed by
federal and state law and the Optionee hereby agrees that the Company shall not
be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate law or any rule, regulation, order or consent
decree of any regulatory authority (including without limitation the Securities
and Exchange Commission) having jurisdiction over the affairs of the Company.
The Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section 12.
13. Restriction on Disposition of Shares. The shares purchased pursuant to the
exercise of an Incentive Stock Option shall not be transferred by the Optionee
except pursuant to the Optionee's will, or the laws of descent and distribution,
until such date which is the later of two years after the grant of such
Incentive Stock Option or one year after the transfer of the shares to the
Optionee pursuant to the exercise of such Incentive Stock Option.
14 Miscellaneous.
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be governed by the
laws of, the State of Florida.
(c) Any requests or notices to be given hereunder shall be deemed given, and any
elections or exercises to be made or accomplished shall be deemed made or
accomplished, upon actual delivery thereof to the designated recipient, or three
days after deposit thereof in the United States mail, registered, return receipt
requested and postage prepaid, addressed, if to the Optionee, at the address set
forth below and, if to the Company, to the executive offices of the Company at
One Independent Drive, Jacksonville, Florida 32202.
(d) This Agreement may not be modified except in writing executed by each of
the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock
Option Agreement to be executed on behalf of the Company and the Company's seal
to be affixed hereto and attested by the Secretary or an Assistant Secretary of
the Company, and the Optionee has executed this Stock Option Agreement under
seal, all as of the day and year first above written.
MODIS PROFESSIONAL SERVICES, INC. OPTIONEE
By:__________________________
Name: Name:
Title: Address:
ATTEST:
_____________________________
Secretary/Assistant Secretary
7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of January 14, 1997 (the
"Effective Date"), by and between AccuStaff Incorporated, a Florida corporation
(the "Employer") and Marc M. Mayo, a resident of the State of Florida (the
"Executive").
In consideration of the mutual promises, agreements and covenants, and
subject to the terms and conditions contained in this Agreement, the Employer
and the Executive, intending to be legally bound, hereby agree as follows:
1. Employment. The Employer hereby employs the Executive as Senior Vice
President and Counsel, and the Executive hereby accepts such employment by the
Employer, in accordance with and subject to the terms and conditions of this
Agreement. The Executive will report directly to the Chief Executive Officer of
Employer.
2. Duties and Authority. As Senior Vice President and Counsel, the
Executive shall be responsible for administering all labor and employment
related affairs of the Employer and shall perform such other duties as are
assigned to the Executive by the Chief Executive Officer of the Employer. The
Executive agrees to devote his full time, attention and best efforts to the
performance of his duties hereunder.
3. Term, Employment Period. The term of employment shall begin on the
Effective Date and shah terminate on January 14, 2000, unless Otherwise renewed
or terminated as provided herein. For purposes of this Agreement, the period
beginning on the Effective Date and ending on the Date of Termination (as
defined in paragraph 8.F. below) shah be referred to herein as the "Employment
Period."
4. Compensation. During the Employment Period, the Executive will receive
the following compensation:
A. Base Salary. A base annual salary of $200,000 (the "Base Salary"),
payable in accordance with the Employer's standard practice for other comparable
executives.
B. Incentive Compensation. Additional compensation (the "Incentive
Compensation") shall be paid to the Executive in an amount as determined by the
Chief Executive Officer, provided, however, that Incentive Compensation shall be
at least $15,000 for each fiscal year during the Employment Period. The
Incentive Compensation payment shall be made on or before March 31 of the year
following the fiscal year to which such Incentive Compensation relates.
5. Stock Options. On the Effective Date, AccuStaff shall grant to the
Executive 100,000 non-incentive stock options (the "Options") under the
AccuStaff 1995 Stock Option Plan. The Options shall have an exercise price equal
to the fair market value of the Employer's common stock on the date of grant.
The Options shall be exercisable 33% per year beginning one year from the
Effective Date. A form of Stock Option Agreement relating to the Options is
attached hereto as Exhibit A.
6. Benefits. During the term of this Agreement, the Employer shall provide
the Executive with all retirement, welfare, deferred compensation, disability,
life insurance and other benefits generally provided to all of the Employer's
other senior executive officers. The Executive shall receive 20 days of paid
vacation per year. The Executive shall be immediately vested in the Company's
401(k) Plan. The Employer shall also provide the Executive with term life
insurance coverage in the amount of $500,000 but such premium shall be limited
to an amount not to exceed a standard rating. The Employer shall reimburse the
Executive for all reasonable and necessary expenses incurred while conducting
the Employer's business in accordance with policies adopted by the Employer from
time to time. The Employer shall pay the membership dues for the Executive at
the Epping Forest and Deerwood clubs. The Employer shall also pay up to $1,000
annually for professional membership dues and will also pay all approved seminar
education obligations. Furthermore, the Employer shall pay the Executive or a
leasing company, at the Executive's option, $500 per month for an automobile
used by the Executive for business purposes. The Executive acknowledges that
pursuant to the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, the Employer may be required to report for tax purposes
all or a portion of certain of the benefits and reimbursements provided in this
Agreement as income in respect of the Executive.
7. Non-Competition; Non-Solicitation, Non-Disclosure. In consideration of
the employment of the Executive by the Employer, the Executive agrees as
follows:
A. Non-Competition. During the Employment Period and for a period of two
(2) years after the Date of Termination, the Executive will not, directly or
indirectly, within a fifty mile radius of any office of the Employer, (or any
subsidiary of the Employer) in existence on the Date of Termination, own,
manage, be employed by, work for, consult for, be an officer or director of;
advise, represent, engage in or carry on any business which competes with the
business of the employer at that time, provided, however, that the Executive may
engage in the private practice of law.
B. Non-Disclosure of Information. The Executive will not at any time,
during or after the term of this Agreement in any fashion, form, or manner,
either directly or indirectly, divulge, disclose, or communicate to any person,
firm, or corporation, in any manner whatsoever, any information of any kind,
nature, or description concerning any matters affecting or relating to the
business of the Employer, including, but not limited to, the names of any of its
customers, or prospective customers or any other information concerning the
business of the Employer, its manner of operation, its plans, its vendors, its
suppliers, its advertising, its marketing, its methods, its practices, or any
other information of any kind, nature, or description, without regard to whether
any or all of the foregoing matters would otherwise be deemed confidential,
material, or important.
9. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
Additionally, if the Employer determines in good faith that a Total Disability
of the Executive has occurred, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Employer shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date") if, within the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Total Disability" shall mean the physical or mental condition
rendering the Executive unable, for a total of six (6) months during any twelve
month period, to perform the duties and bear the responsibilities referred to in
paragraph No. 2 herein which is determined to be total and permanent by a
physician selected by the Employer or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
B. Cause. The Employer may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean
(i) a material breach by the Executive of the Executive's obligations under
paragraph 2 above (other than as a result of temporary incapacity due to
physical or mental illness, or Disability) which is willful and deliberate on
the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Employer, and which is
not remedied in a reasonable period of time (to be not less than 15 days) after
receipt of written notice from the Employer specifying such breach; (ii) the
conviction of the Executive for a felony, or (iii) a breach of the Executive's
fiduciary duty to the Employer or willful violation in the course of performing
his duties for the Employer of any law, rule or regulation (other than traffic
violation or other minor offenses). No act or failure to act on the Executive's
part shall be considered willful unless done or omitted to be done in bad faith
and without reasonable belief that the action or omission was in the best
interest of the Employer.
C. Good Reason. The Executive's employment may be terminated by the
Executive at any time for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean:
(i) the assignment by the Employer of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles, and
reporting requirement), authority, duties or responsibilities as contemplated by
paragraph 2 or any other action by the Employer which results in a diminution in
such position, authority, duties, or responsibilities, excluding for this
purpose an isolated, insubstantial, and inadvertent action not taken in bad
faith and which is remedied by the Employer promptly after receipt of' notice
thereof given by the Executive;
(ii) any failure by the Employer to comply with any of the provisions of
this Agreement, other than an isolated, insubstantial, and inadvertent failure
not occurring in bad faith and which is remedied by the Employer promptly after
receipt of notice thereof given by the Executive;
(iii) a Change in Control. For the purposes of this Agreement, 'Change in
Control' shall mean:
(i) an acquisition of any voting securities of the Employer by any "Person"
(as the term person is used for purposes of Section 3(d) or 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act")), immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-d
promulgated under the 1934 Act) of 25% or more of either (a) the then
outstanding shares of common stock of the Employer or (b) the combined
voting power of the then outstanding voting securities of the Employer
entitled to vote generally in the election of directors;
(ii) individuals who, as of the Effective Date, constitute the Board of
Directors of Employer cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by the Employer's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Board of Directors shall be
considered as though such individual were a member of the Board of
Directors of Employer as of the Effective Date;
(iii) approval by the shareholders of Employer of a reorganization, merger,
or consolidation, in each case unless the shareholders of Employer
immediately before such reorganization, merger, or consolidation own,
directly or indirectly, immediately following such reorganization, merger,
or consolidation at least a majority of the combined voting power of the
outstanding, voting securities of the corporation resulting from such
reorganization, merger, or consolidation in substantially the same
proportion as their ownership of the voting securities immediately before
such reorganization, merger, or consolidation; or
(iv) approval by the shareholders of. Employer of (a) a complete
liquidation or dissolution of the Employer or (b) the sale or other
disposition of all or substantially all of the assets of the Employer,
D. Without Cause. Either the Employer or the Executive may terminate this
Agreement without Cause or reason upon not less than 30 days written notice
to the other, setting forth the effective date of termination.
E. Notice of Termination. Any termination by the Employer for Cause, or by
the Executive for Good Reason, shall be communicated to the other party by
Notice of Termination. For purposes of this Agreement, a "Notice of Termination"
means (i) a written notice which indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment, and (iii) specifies the Date of
Termination. The failure by the Executive or the Employer to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Employer
hereunder or preclude the Executive or the Employer from asserting such fact or
circumstance in enforcing the Executive's or the Employer's rights hereunder.
F. Date of Termination. "Date of Termination" means (i) the end of the term
of the Agreement specified in paragraph 3 (as such term may be extended from
time to time by written agreement of both parties) if Employer has given any
combination of a total of six (6) months of notice or severance pay (such pay to
consist of the applicable prorated Base Salary and Incentive Compensation); (ii)
if the Executive's employment is terminated by the Employer for Cause, or by the
Executive for Good Reason, the date specified in the Notice of Termination as
the Date of Termination; (iii) if the Executive's employment is terminated by
reason of death or Disability, the date of death of the Executive or the
Disability Effective Date, as the case may be; and (iv) if the Executive's
employment is terminated by either party other than for death, Disability, Cause
or Good Reason, the date set forth in the notice required under subparagraph D.
above as the Date of Termination is to be effective.
10. Obligations of the Employer upon Termination. Upon the termination of
the Executive's employment for any reason, the Executive shall be entitled to
Base Salary and all benefits (including accrued vacation) through the Date of
Termination. Upon the termination of the Executive's employment other than by
(i) the expiration of the Employment Period (or any extension of such term),
(ii) the Executive without Good Reason, or (iii) the Employer with Cause, the
Executive shall in addition be entitled to receive (i) a lump sum payment equal
to the present value of the Executive's annual Base Salary as of the Date of
Termination (ii) a lump sum payment of the present value of the pro rata
Incentive Compensation payment as determined through the Date of Termination;
and (iii) all unvested options to acquire the Employer's common stock granted to
the Executive pursuant to the Stock Option Agreement between the Executive and
the Employer of even date herewith shall immediately vest and become
exercisable. For purposes of this Agreement, "present value" shall be determined
by using the "Applicable Federal Rate" for the period corresponding with that
period over which the present value is being determined. The lump sum payment
shall be paid no later than thirty days after the Date of Termination in
immediately available United States funds.
11. Mitigation of Damages. The Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of self-employment or employment by another employer or
otherwise.
12. Mandatory Deductions. Any amounts to which the Executive is entitled as
compensation, bonus, merit bonus, or any other form of compensation subject to
withholding shall be subject to usual deduction for appropriate federal, state,
and local income tax obligations of the Executive.
13. Notices. Any notice provided for in this Agreement shall be given in
writing. Notices shall be effective from the date of receipt, if delivered
personally to the party to whom notice is to be given, or on the second day
after mailing, if mailed by first class mail, postage prepaid. Notices shall be
properly addressed to the parties at their respective addresses set forth below
or to such other address as either party may later specify by notice to the
other:
If to the Employer:
AccuStaff Incorporated
6440 Atlantic Boulevard
Jacksonville, Florida 32211
Attn: Chief Executive Officer
If to the Executive:
To the then current address of the
Executive appearing in the corporate
records of the Company
14. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment or modification is sought.
15. Waiver. The waiver by one party of a breach of any of the provisions of
this Agreement by the other shall not be construed as a waiver of any subsequent
breach.
16. Governing Law, Venue. The Agreement shall be construed and enforced in
accordance with the laws of the State of Florida. Duval County, Florida, shall
be the proper venue for any litigation arising out of this Agreement.
17. Paragraph Headings. Paragraph headings are for convenience only and are
not intended to expand or restrict the scope or substance of the provisions of
this Agreement.
18. Assignability. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment agreement
and the rights, obligations, and interests of the Executive hereunder may not be
sold, assigned, transferred, pledged, or hypothecated.
19. Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and shall in no way be impaired.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary, in making proof of this Agreement to account for more than one such
counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ACCUSTAFF INCORPORATED
By: /s/ Derek E. Dewan________
Derek E. Dewan
Chairman, President and Chief Executive Officer
THE EXECUTIVE
By: /s/ Marc M. Mayo ______
Marc M. Mayo
7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of April 1, 1997 (the "Effective
Date"), by and between AccuStaff Incorporated, a Florida corporation (the
"Employer") and Tim Payne, a resident of the State of Florida (the "Executive").
In consideration of the mutual promises, agreements and covenants, and
subject to the terms and conditions contained in this Agreement, the Employer
and the Executive, intending to be legally bound, hereby agree as follows:
1. Employment. The Employer hereby employs the Executive as Chief Operating
Officer of AccuStaff's Information Technology Division ("IT Division"), and the
Executive hereby accepts such employment by the Employer, in accordance with and
subject to the terms and conditions of this Agreement. The Executive will report
directly to the Chief Executive Officer of Employer.
2. Duties and Authority. As Chief Operating Officer of the IT Division, the
Executive shall be responsible for management, fiscal responsibilities, and
strategic planning of the IT Division and shall perform such other duties as are
assigned to the Executive by the Chief Executive Officer of the Employer. For
purposes of this Agreement, the IT Division shall be defined as including all
the subsidiaries and affiliates of the Employer performing IT consulting,
staffing or outplacement services, regardless of whether the Division shall at
some time take on another name or corporate form. The Executive agrees to devote
his full time, attention and best efforts to the performance of his duties
hereunder.
3. Term, Employment Period. The term of employment shall begin on the
Effective Date and shah terminate on March 31, 2000, unless Otherwise renewed or
terminated as provided herein. For purposes of this Agreement, the period
beginning on the Effective Date and ending on the Date of Termination (as
defined in paragraph 8.F. below) shah be referred to herein as the "Employment
Period."
4. Compensation. During the Employment Period, the Executive will receive
the following compensation:
A. Base Salary. A base annual salary of $200,000 until October 1, 1997,
then increased to $250,000 for the next pay period thereafter (the "Base
Salary"), payable in accordance with the Employer's standard practice for other
comparable executives.
B. Incentive Compensation. Additional compensation (the "Incentive
Compensation") shall be paid to the Executive in an amount as determined by the
Chief Executive Officer. The Incentive Compensation payment shall be made on or
before March 31 of the year following the fiscal year to which such Incentive
Compensation relates.
The Incentive Compensation payment shall be made on or before March 31 of the
year following the fiscal year to which such Incentive Compensation relates.
5. Stock Options. On the Effective Date, AccuStaff shall grant to the
Executive 200,000 non-incentive stock options (the "Options") under the
AccuStaff 1995 Stock Option Plan. The Options shall have an exercise price equal
to the fair market value of the Employer's common stock on the date of grant.
The Options shall be exercisable 33.33% per year beginning one year from the
Effective Date. A form of Stock Option Agreement relating to the Options is
attached hereto as Exhibit A.
6. Benefits. During the term of this Agreement, the Employer shall provide
the Executive with all retirement, welfare, deferred compensation, disability,
life insurance and other benefits generally provided to all of the Employer's
other senior executive officers. The Executive shall receive 20 days of paid
vacation per year. The Employer shall reimburse the Executive for all reasonable
and necessary expenses incurred while conducting the Employer's business in
accordance with policies adopted by the Employer from time to time. The Employer
shall pay the Executive $500 per month for an automobile used by the Executive
for business purposes. The Executive acknowledges that pursuant to the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder,
the Employer may be required to report for tax purposes all or a portion of
certain of the benefits and reimbursements provided in this Agreement as income
in respect of the Executive.
7. Non-Competition; Non-Solicitation, Non-Disclosure. In consideration of
the employment of the Executive by the Employer, the Executive agrees as
follows:
A. Non-Competition. During the Employment Period and for a period of two
(2) years after the Date of Termination, the Executive will not, directly or
indirectly, own, manage, be employed by, work for, consult for, be an officer or
director of; advise, represent, engage in or carry on any business which
competes with the IT staffing, consulting or outplacement business of the
Employer as it exists at that time, provided, however, that the Executive may
engage in providing consulting services which do not compete with Employer's IT
Division.
B. Non-Solicitation. During the Employment Period and for a period of two
(2) years after the Date of Termination, the Executive will not solicit or
accept any IT staffing, consulting or outsourcing business from any of the
clients of Employer's IT Division. During this period, Executive shall not hire,
recruit or attempt to recruit, for any business which competes with Employer's
IT Division, any person employed or contracted with Employer's IT Division or
employed or contracted with Employer's IT Division at any time during the
previous twelve (12) months.
C. Non-Disclosure of Information. The Executive will not at any time,
during or after the term of this Agreement in any fashion, form, or manner,
either directly or indirectly, divulge, disclose, or communicate to any person,
firm, or corporation, in any manner whatsoever, any confidential, proprietary,
or trade secrete information of any kind, nature, or description concerning any
matters affecting or relating to the business of the Employer, including, but
not limited to, matters of a technical nature, such as formulae, "know how",
schematics, technical drawings, secret processes or machines, inventions,
computer software, product sources, product research and designs, and matters of
a business nature, such as its client lists, client contact information,
consultant or contractor information, on-site program(s) and support materials,
candidate and recruit lists and information, placement information, pricing
lists, contracts, sales reports, sales, financial and marketing data, systems,
forms, methods, procedures, and analyses, and any other proprietary information,
whether communicated orally or in documentary or other tangible form, concerning
how Employer's IT Division operates its business. The parties to this Agreement
recognize that Employer has invested considerable amount of time and money in
attaining and developing all of the information described above and any
unauthorized disclosure or release of such Confidential Information in any form
would irreparably harm Employer.
9. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
Additionally, if the Employer determines in good faith that a Total Disability
of the Executive has occurred, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Employer shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date") if, within the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Total Disability" shall mean the physical or mental condition
rendering the Executive unable, for a total of six (6) months during any twelve
month period, to perform the duties and bear the responsibilities referred to in
paragraph No. 2 herein which is determined to be total and permanent by a
physician selected by the Employer or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
B. Cause. The Employer may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean
(i) a material breach by the Executive of the Executive's obligations under
paragraph 2 above (other than as a result of temporary incapacity due to
physical or mental illness, or Disability) which is willful and deliberate on
the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Employer, and which is
not remedied in a reasonable period of time (to be not less than 15 days) after
receipt of written notice from the Employer specifying such breach; (ii) the
conviction of the Executive for a felony, or (iii) a breach of the Executive's
fiduciary duty to the Employer or willful violation in the course of performing
his duties for the Employer of any law, rule or regulation (other than traffic
violation or other minor offenses). No act or failure to act on the Executive's
part shall be considered willful unless done or omitted to be done in bad faith
and without reasonable belief that the action or omission was in the best
interest of the Employer.
C. Good Reason. The Executive's employment may be terminated by the
Executive at any time for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean:
(i) the assignment by the Employer of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles, and
reporting requirement), authority, duties or responsibilities as contemplated by
paragraph 2 or any other action by the Employer which results in a diminution in
such position, authority, duties, or responsibilities, excluding for this
purpose an isolated, insubstantial, and inadvertent action not taken in bad
faith and which is remedied by the Employer promptly after receipt of' notice
thereof given by the Executive;
(ii) any failure by the Employer to comply with any of the provisions of
this Agreement, other than an isolated, insubstantial, and inadvertent failure
not occurring in bad faith and which is remedied by the Employer promptly after
receipt of notice thereof given by the Executive;
(iii) a Change in Control. For the purposes of this Agreement, 'Change
in Control' shall mean:
(i) an acquisition of any voting securities of the Employer by any
"Person" (as the term person is used for purposes of Section 3(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act")),
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-d promulgated under the 1934 Act) of 25% or
more of either (a) the then outstanding shares of common stock of the
Employer or (b) the combined voting power of the then outstanding
voting securities of the Employer entitled to vote generally in the
election of directors;
(ii) individuals who, as of the Effective Date, constitute the Board
of Directors of Employer cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the Effective Date whose election, or
nomination for election by the Employer's shareholders, was approved
by a vote of at least a majority of the directors then comprising the
Board of Directors shall be considered as though such individual were
a member of the Board of Directors of Employer as of the Effective
Date;
(iii) approval by the shareholders of Employer of a reorganization,
merger, or consolidation, in each case unless the shareholders of
Employer immediately before such reorganization, merger, or
consolidation own, directly or indirectly, immediately following such
reorganization, merger, or consolidation at least a majority of the
combined voting power of the outstanding, voting securities of the
corporation resulting from such reorganization, merger, or
consolidation in substantially the same proportion as their ownership
of the voting securities immediately before such reorganization,
merger, or consolidation; or
(iv) approval by the shareholders of. Employer of (a) a complete
liquidation or dissolution of the Employer or (b) the sale or other
disposition of all or substantially all of the assets of the Employer,
D. Without Cause. Either the Employer or the Executive may terminate this
Agreement without Cause or reason upon not less than 30 days written notice to
the other, setting forth the effective date of termination.
E. Notice of Termination. Any termination by the Employer for Cause, or by
the Executive for Good Reason, shall be communicated to the other party by
Notice of Termination. For purposes of this Agreement, a "Notice of Termination"
means (i) a written notice which indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment, and (iii) specifies the Date of
Termination. The failure by the Executive or the Employer to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Employer
hereunder or preclude the Executive or the Employer from asserting such fact or
circumstance in enforcing the Executive's or the Employer's rights hereunder.
F. Date of Termination. "Date of Termination" means (i) the end of the term
of the Agreement specified in paragraph 3 (as such term may be extended from
time to time by written agreement of both parties) if Employer has given any
combination of a total of six (6) months of notice or severance pay (such pay to
consist of the applicable prorated Base Salary and Incentive Compensation); (ii)
if the Executive's employment is terminated by the Employer for Cause, or by the
Executive for Good Reason, the date specified in the Notice of Termination as
the Date of Termination; (iii) if the Executive's employment is terminated by
reason of death or Disability, the date of death of the Executive or the
Disability Effective Date, as the case may be; and (iv) if the Executive's
employment is terminated by either party other than for death, Disability, Cause
or Good Reason, the date set forth in the notice required under subparagraph D.
above as the Date of Termination is to be effective.
10. Obligations of the Employer upon Termination. Upon the termination of
the Executive's employment for any reason, the Executive shall be entitled to
Base Salary and all benefits (including accrued vacation) through the Date of
Termination. Upon the termination of the Executive's employment other than by
(i) the expiration of the Employment Period (or any extension of such term),
(ii) the Executive without Good Reason, or (iii) the Employer with Cause, the
Executive shall in addition be entitled to receive (i) a lump sum payment equal
to the present value of the Executive's annual Base Salary as of the Date of
Termination (ii) a lump sum payment of the present value of the pro rata
Incentive Compensation payment as determined through the Date of Termination;
and (iii) all unvested options to acquire the Employer's common stock granted to
the Executive pursuant to the Stock Option Agreement between the Executive and
the Employer of even date herewith shall immediately vest and become
exercisable. For purposes of this Agreement, "present value" shall be determined
by using the "Applicable Federal Rate" for the period corresponding with that
period over which the present value is being determined. The lump sum payment
shall be paid no later than thirty days after the Date of Termination in
immediately available United States funds.
11. Mitigation of Damages. The Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of self-employment or employment by another employer or
otherwise.
12. Mandatory Deductions. Any amounts to which the Executive is entitled as
compensation, bonus, merit bonus, or any other form of compensation subject to
withholding shall be subject to usual deduction for appropriate federal, state,
and local income tax obligations of the Executive.
13. Notices. Any notice provided for in this Agreement shall be given in
writing. Notices shall be effective from the date of receipt, if delivered
personally to the party to whom notice is to be given, or on the second day
after mailing, if mailed by first class mail, postage prepaid. Notices shall be
properly addressed to the parties at their respective addresses set forth below
or to such other address as either party may later specify by notice to the
other:
If to the Employer:
AccuStaff Incorporated
6440 Atlantic Boulevard
Jacksonville, Florida 32211
Attn: Chief Executive Officer
or Its Then Current Address
If to the Executive:
To the then current address of the Executive appearing in the
corporate records of the Company
14. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment or modification is sought.
15. Waiver. The waiver by one party of a breach of any of the provisions of
this Agreement by the other shall not be construed as a waiver of any subsequent
breach.
16. Governing Law, Venue. The Agreement shall be construed and enforced in
accordance with the laws of the State of Florida. Duval County, Florida, shall
be the proper venue for any litigation arising out of this Agreement.
17. Paragraph Headings. Paragraph headings are for convenience only and are
not intended to expand or restrict the scope or substance of the provisions of
this Agreement.
18. Assignability. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment agreement
and the rights, obligations, and interests of the Executive hereunder may not be
sold, assigned, transferred, pledged, or hypothecated.
19. Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and shall in no way be impaired.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary, in making proof of this Agreement to account for more than one such
counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ACCUSTAFF INCORPORATED
By: /s/ Derek E. Dewan________
Derek E. Dewan
Chairman, President and Chief Executive Officer
THE EXECUTIVE
By: /s/ Timothy D. Payne______
Tim Payne
<TABLE>
<CAPTION>
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
<S> <C>
SUBSIDIARY NAME JURISDICTION OF
INCORPORATION
Accounting Principals, Ltd. Pennsylvania
Actium Corporation Delaware
AD, L.L.C.I Delaware
Additional Technical Support of Massachusetts, Inc. Massachusetts
Amicus Staffing, Inc. Tennessee
AMPL Incorporated California
(d/b/a Parker & Lynch)
Avalon Systems Development Limited United Kingdom
Badenoch & Clark Limited United Kingdom
BC, L.L.C.I Delaware
Berger IT Co. Delaware
(d/b/a Modis Solutions)
Brenda Pejovich & Associates, Inc. Texas
Career Horizons, Inc. Delaware
Consulting Partners, Inc. Texas
Cope Management Limited United Kingdom
Diversified Search, Inc. Pennsylvania
Entegee, Inc. Massachusetts
(d/b/a Cadstar International, Ltd., and
National Software Associates)
Health Force, Inc. New York
Health Force Operating Corp. New York
Hunterskil Howard PLC United Kingdom
IT Link, Ltd. United Kingdom
Keystone Consulting Group, Inc. Georgia
Lion Recruitment Limited United Kingdom
LIT, Inc. New York
Manchester, Inc. Pennsylvania
(d/b/a CareerInteractive)
Medi-Force, Inc. New York
Modis, Inc. Florida
(d/b/a Actium, Alta Technical Services, Berrett Techalliance Corporation,
Business Systems, Computer Consultants Group, Computer Consulting Group,
Computer Professionals, Inc. Consultants in Computer Software, Contact
Recruiters, Custom Software Services, Datacorp, EMI, Florida Modis, Inc., GW
Consulting, HUM Consulting, MGI Services, Mini-Systems, NACS, North American
Consulting Services, North American Consulting Services, Inc., Openware
Technologies, Inc., Ovation Technologies, Preferred Consulting Services,
Perspective Technology Corporation, Realtime Consulting, Resource Solutions
Group, Staffware, Technical Software, Technical Software Solutions, The
Blackstone Group, TSG Professional Services, Wasser, Why Systems and Zeitech)
Modis Factoring Corporation Florida
Modis of Georgia, LP Georgia
Modis/Computer Action, Inc. Florida
Modis GP, Inc. Florida
Modis Licensing Corporation Florida
Modis LP-2, Inc. Florida
Modis of Georgia, Inc. Florida
Modis of Pennsylvania, Inc. Florida
Modis of Pennsylvania, Ltd. Pennsylvania
(d/b/a Actium)
Modis Operations, Inc. Florida
Modis Professional Services, Inc. Florida
(d/b/a Alternative Temps and Modis)
Modis (UK) Limited United Kingdom
Resource Control and Management Limited United Kingdom
Scientific Staffing, Inc. Pennsylvania
Software Knowledge Limited United Kingdom
Software Knowledge Systems Limited United Kingdom
Special Counsel, Inc. Maryland
(d/b/a LSP and Legal Support Personnel)
System Pros of Massachusetts, Inc. Massachusetts
T&H Receivable Holding, Inc. Florida
</TABLE>
Consent of Independent Accountants
Consent of PricewaterhouseCoopers LLP
March 26, 1999
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Modis Professional Services, Inc. on Form S-3 (Reg. Nos. 333-17715, 333-18695,
333-49505 and 333-67271) and on Form S-8 (Reg. Nos. 33-99262, 333-06899,
333-15701, 333-16043, 333-30455, 333-41305, 333-49495, 333-49493, 333-58261 and
333-69915) of our report dated March 26, 1999, on our audits of the consolidated
financial statements of Modis Professional Services, Inc. as of December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, which report is included in the Company's filing on Form 10-K.
PricewaterhouseCoopers LLP
Jacksonville, Florida
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<S> <C>
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<PERIOD-TYPE> 12-MOS
<CASH> 105,816
<SECURITIES> 0
<RECEIVABLES> 340,192
<ALLOWANCES> 13,007
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<CURRENT-ASSETS> 498,538
<PP&E> 78,309
<DEPRECIATION> 40,732
<TOTAL-ASSETS> 1,571,881
<CURRENT-LIABILITIES> 473,400
<BONDS> 0
0
0
<COMMON> 963
<OTHER-SE> 1,069,147
<TOTAL-LIABILITY-AND-EQUITY> 1,571,881
<SALES> 1,702,113
<TOTAL-REVENUES> 1,702,113
<CGS> 1,234,537
<TOTAL-COSTS> 336,415
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<INCOME-TAX> 48,326
<INCOME-CONTINUING> 68,860
<DISCONTINUED> 260,581
<EXTRAORDINARY> 5,610
<CHANGES> 0
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