<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ROMAC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 7361 59-3264661
(State or Other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
120 WEST HYDE PARK PLACE, SUITE 200
TAMPA, FLORIDA 33606
(813) 258-8855
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
DAVID L. DUNKEL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ROMAC INTERNATIONAL, INC.
120 WEST HYDE PARK PLACE, SUITE 200
TAMPA, FLORIDA 33606
(813) 258-8855
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
MICHAEL L. JAMIESON, ESQ. BENJAMIN F. GARMER, III, ESQ.
HOLLAND & KNIGHT FOLEY & LARDNER
400 NORTH ASHLEY DRIVE, SUITE 2300 777 EAST WISCONSIN AVENUE
TAMPA, FLORIDA 33602 MILWAUKEE, WISCONSIN 53217
(813) 227-8500 (414) 271-2400
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / / ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01
per share................... 3,036,000 shares $18.25 $55,407,000 $19,106
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 396,000 shares to cover over-allotments, if any, pursuant to
over-allotment option granted to the underwriters.
(2) Estimated solely for purposes of determining the registration fee, pursuant
to Rule 457(c). Based upon the last sale reported by the Nasdaq National
Market on May 6, 1996, as adjusted for a two for one stock split in the
form of a 100% stock dividend to be reflected on the Nasdaq National Market
on May 23, 1996.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ROMAC INTERNATIONAL, INC.
---------------------
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS
------------------------------------------ ------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Forepart of the Registration Statement and
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors; The
Company
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page; Underwriting
6. Dilution.................................. Inapplicable
7. Selling Security Holders.................. Principal and Selling Shareholders
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered.............................. Description of Capital Stock
10. Interests of Named Experts and Counsel.... Inapplicable
11. Information with Respect to the
Registrant.............................. Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend
Policy; Price Range of Common Stock;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Certain Transactions; Principal and
Selling Shareholders; Description of
Capital Stock; Shares Eligible for
Future Sale; Index to Unaudited Pro
Forma Consolidated Financial
Information; Index to Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Inapplicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 9, 1996
PROSPECTUS
2,640,000 SHARES
ROMAC INTERNATIONAL
[ROMAC LOGO]
COMMON STOCK
---------------------
Of the 2,640,000 shares of common stock offered hereby, 1,610,000 shares
are being offered by Romac International, Inc. and 1,030,000 shares are being
offered by certain Selling Shareholders of the Company. The Company will not
receive any proceeds from the sale of Common Stock by the Selling Shareholders.
See "Principal and Selling Shareholders."
The Common Stock is traded on the Nasdaq National Market under the symbol
"ROMC." Except for the audited historical consolidated financial statements and
as otherwise indicated, all information in this Prospectus has been adjusted to
reflect the two-for-one stock split in the form of a 100% stock dividend to
shareholders of record on May 15, 1996, which will be reflected on the Nasdaq
National Market on May 23, 1996. On May 6, 1996, the last reported sale price of
the Common Stock on the Nasdaq National Market was $18.25 per share.
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $500,000, all of which are payable by
the Company.
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase, in the aggregate, up to 396,000 additional shares of
the Common Stock on the same terms and conditions as set forth above to
cover over-allotments, if any. If the Underwriters exercise the
over-allotment option in full, the total Price to Public will be
$ , the total Underwriting Discounts and Commissions will be
$ , the total Proceeds to Company will be $ and the total
Proceeds to Selling Shareholders will be $ . See "Underwriting."
---------------------
The shares of Common Stock are offered by the Underwriters subject to prior
sale, when, as and if delivered to and accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that the
delivery of the certificates representing shares of the Common Stock will be
made on or about , 1996 through the Depository Trust Company or at
the offices of Robert W. Baird & Co. Incorporated, Milwaukee, Wisconsin.
ROBERT W. BAIRD & CO. PRUDENTIAL SECURITIES INCORPORATED
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4
Three interlocking circles representing the Company's integrated approach
to providing specialty staffing services.
Paste-up Mac chart
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING
GROUP MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following is a summary of the more detailed information and financial
statements appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus, except for the audited historical
consolidated financial statements of the Company, assumes that the Underwriters'
over-allotment option will not be exercised, and gives retroactive effect to a
two-for-one stock split in the form of a 100% stock dividend to shareholders of
record on May 15, 1996 and which will be reflected on the Nasdaq National Market
on May 23, 1996. Unless the context otherwise requires, references to the
"Company" or "Romac" are to Romac International, Inc.
THE COMPANY
Romac International, Inc. is a specialty staffing services firm providing
temporary, contract, and permanent placement of professional and technical
personnel. The Company is organized into three divisions: the Professional
Temporary Division provides professional temporary personnel in the fields of
finance and accounting; the Contract Services Division provides information
systems, manufacturing services, human resources, health care, and
pharmaceutical personnel generally on a longer-term contractual basis; and the
Search Division provides permanent placement of specialized personnel in the
fields of accounting and finance, information systems, financial services,
pharmaceutical research, health care, human resources, insurance, manufacturing
services, and sales and marketing. The Company believes its range of services
provides clients with integrated solutions to their temporary, contract, and
permanent specialty staffing needs, allowing the Company to develop long-term,
consultative relationships with its clients. The Company also believes the
interaction among its three divisions generates increased placement
opportunities and enhances the Company's ability to attract and place higher
quality candidates. The Company principally serves Fortune 1000 companies in
twelve metropolitan markets through Company-owned locations and five additional
markets through franchisees and licensees.
The Company's objective is to be the nationally recognized leader in
providing specialty staffing services. The Company strives to differentiate
itself from others in the staffing industry through innovative service
offerings, a consultative and results-oriented approach to client relationships,
and high-quality personnel placements. In pursuing its objective, the Company
focuses exclusively on providing professional and technical personnel, rather
than clerical or light industrial personnel, because of the generally higher
profitability and the opportunity for growth of this market segment. The Company
believes it has a recruiting advantage over those of its competitors that lack
the ability to offer candidates temporary, contract, and permanent
opportunities. Candidates seeking permanent employment frequently accept
temporary or contract assignments through the Company until a permanent position
becomes available. The Company also believes the ROMAC(R) name recognition,
coupled with its industry expertise and innovative use of technology, provide it
with competitive benefits.
The Company's growth strategy is to increase revenue and profitability by
expanding its services in existing markets and introducing its full range of
services into new markets. In existing markets, the Company intends to further
develop existing clients and expand its client base by (i) introducing its full
range of services in all of its markets, (ii) taking advantage of the
cross-selling opportunities provided by the complementary services offered by
its three divisions, (iii) introducing new services, and (iv) acquiring
complementary businesses. The Company intends to enter new markets by opening
new Company-owned locations and making strategic acquisitions. In the last
twelve months, the Company has entered four new markets: two through start-ups,
one through franchise conversion to a Company-owned location, and one through
acquisition. In addition, the Company has developed a major accounts program,
which encourages large users of staffing services to "carve-out" the
professional and technical segments of staffing contracts and award such
business to the Company instead of large generalist staffing firms. As a result
of this program, the Company has signed several contracts with major national
corporations for certain of the Company's services. Management believes there is
substantial opportunity for growth through the continued implementation of this
strategy.
3
<PAGE> 6
The Company was formed by current management in August 1994 through the
combination of a specialty staffing services firm in operation under the Romac
name since 1966 and three of its largest franchisees (the "1994 Combination").
Since the Company's initial public offering in August 1995, the Company has
introduced Contract Services in its Philadelphia and Chicago locations,
introduced Search services in its Houston location, and expanded into the
Pittsburgh market through a new Company-owned location. The Company has also
acquired certain assets of the following entities: Venture Networks Corporation,
Inc. (Boston), PCS Group, Inc. (Louisville), and Strategic Outsourcing, Inc.
(Boston) (collectively, the "Acquisitions"). These strategic acquisitions have
enhanced the Company's Contract Services capabilities, increased the Company's
geographic presence, and introduced human resource contract and outsourcing
services, and outplacement services, to the Company's existing product
offerings.
The temporary staffing industry has grown rapidly in recent years as
companies have utilized temporary employees to manage personnel costs while
meeting specialized or fluctuating staffing requirements. According to a study
by the National Association of Temporary and Staffing Services ("NATSS"), the
United States temporary staffing industry grew from approximately $20.4 billion
in revenue in 1991 to approximately $39.2 billion in revenue in 1995, a compound
annual growth rate of 17.7%. Furthermore, according to the Staffing Industry
Report, the professional and technical segments of the temporary staffing
industry are estimated to have grown by 25.0% from 1994 to 1995 to $8.9 billion.
This compares with estimated 1994 to 1995 growth of 15.0% and 8.0%,
respectively, in the clerical and industrial segments.
THE OFFERING
Common Stock offered by the Company....... 1,610,000 shares
Common Stock offered by the Selling
Shareholders.............................. 1,030,000 shares
Common Stock to be outstanding after the
Offering(1)............................... 11,264,782 shares
Use of Proceeds........................... For general corporate purposes
including expansion of the
Company's operations, purchase of
capital equipment, and possible
acquisitions
Nasdaq National Market Symbol............. ROMC
- ---------------
(1) Does not include shares of Common Stock subject to outstanding options under
the Company's stock option plans. See "Management -- Incentive Stock Option
Plan" and "Management -- Director Compensation."
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
Prior to September 1, 1994, the Company's business was conducted under
separate ownership and management by FMA International, Inc. ("Romac-FMA"),
which was a Romac franchisee, the Romac franchisor, and certain other Romac
franchisees. The 1994 Combination became effective on August 31, 1994 and all of
the financial data set forth below have been restated to give effect to the 1994
Combination, which has been accounted for as a pooling of interests. Since
August 31, 1994, the Company's business has been conducted under common
ownership and its operations have been conducted by the former management of
Romac-FMA, which became the management of the Company. The information below
reflects a two-for-one stock split in the form of a stock dividend to
shareholders of record on May 15, 1996 and which will be reflected on the Nasdaq
National Market on May 23, 1996.
<TABLE>
<CAPTION>
THREE MONTHS PRO FORMA
PRO FORMA ENDED THREE MONTHS
YEARS ENDED DECEMBER 31, YEAR ENDED MARCH 31, ENDED
----------------------------------------------- DECEMBER 31, ---------------- MARCH 31,
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
------- ------- ------- ------- ------- ------------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net service revenues....... $24,155 $31,250 $40,346 $40,789 $45,655 $ 58,368 $9,562 $16,889 $ 18,355
Gross profit............... 10,619 11,418 14,220 15,938 20,195 27,463 4,203 7,170 7,812
Income (loss) before
taxes.................... (759) 1,091 1,113 (413) 5,021 5,718 1,212 1,709 1,769
Net income (loss)(2)....... (458) 714 650 (599) 3,013 3,431 727 1,025 1,061
Net income per share(3).... $ (0.07) $ 0.11 $ 0.10 $ (0.09) $ 0.36 $ 0.40 $ 0.09 $ 0.10 $ 0.10
Weighted average shares
outstanding(4)........... 6,522 6,588 6,619 7,039 8,488 8,488 7,763 10,338 10,338
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
AS
ACTUAL ADJUSTED(5)
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................................... $ 9,026 $36,292
Total assets.................................................................................. 23,168 50,434
Total long-term debt.......................................................................... 425 425
Shareholders' equity.......................................................................... $18,078 $45,344
</TABLE>
- ---------------
(1) The pro forma consolidated unaudited financial information has been prepared
to reflect the Company's operations as if the Acquisitions had occurred on
January 1, 1995, as further described elsewhere herein. See "Unaudited Pro
Forma Financial Information."
(2) Net income (loss) for the years ended December 31, 1994 and 1995, the pro
forma year ended December 31, 1995, the three months ended March 31, 1995
and 1996, and the pro forma three months ended March 31, 1996, includes
franchise termination income (net of tax) of $336,000, $261,000, $261,000,
$261,000, $64,000, and $64,000, respectively.
(3) Net income (loss) per share for the years ended December 31, 1994 and 1995,
the pro forma year ended December 31, 1995, the three months ended March
31, 1995 and 1996, and the pro forma three months ended March 31, 1996,
includes franchise termination income per share of $0.05, $0.03, $0.03,
$0.03, $0.01, and $0.01, respectively.
(4) Does not include 1,230,970 shares of Common Stock subject to outstanding
options under the Company's stock option plans. See
"Management -- Incentive Stock Option Plans" and "Management -- Director
Compensation."
(5) As adjusted to give effect to the sale by the Company of 1,610,000 shares of
Common Stock offered hereby and after deducting underwriting discounts and
commissions and estimated offering expenses and the application of the net
proceeds therefrom, assuming a public offering price of $18.25 per share.
See "Capitalization."
5
<PAGE> 8
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors in evaluating
the Company and its business before purchasing shares of the Common Stock
offered hereby. This Prospectus contains certain forward-looking statements that
involve risks and uncertainties. Future events and the Company's actual results
could differ materially from the results expected in these forward-looking
statements, as a result of certain of the factors set forth below and elsewhere
in this Prospectus.
POSSIBLE ADVERSE EFFECTS OF FLUCTUATIONS IN THE GENERAL ECONOMY
Historically, the general level of economic activity has significantly
affected the demand for employment services. As economic activity has slowed,
the use of temporary and contract personnel often has been curtailed before
permanent employees have been laid off. An economic downturn may adversely
affect the demand for temporary and contract personnel and may have a material
adverse effect on the Company's results of operations or financial condition. As
economic activity has increased, temporary and contract personnel often have
been added to the work force before permanent employees have been hired. During
these periods of increased economic activity and generally higher levels of
employment, the competition among staffing services firms for qualified
temporary and contract personnel is intense. Further, the Company may face
increased competitive pricing pressures during such periods. There can be no
assurance that during these periods the Company will be able to recruit the
temporary and contract personnel necessary to fill its clients' needs or that
such pricing pressures will not adversely affect the Company's results of
operations. Additionally, during periods of slowed economic activity, the use of
executive search firms tends to decline significantly. See "Business -- Industry
Overview."
DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL
The Company depends upon its ability to attract and retain personnel,
particularly technical and professional personnel, who possess the skills and
experience necessary to meet the staffing requirements of its clients. The
Company must continually evaluate and upgrade its base of available qualified
personnel to keep pace with changing client needs and emerging technologies.
Competition for individuals with proven technical or professional skills is
intense and demand for such individuals is expected to remain very strong for
the foreseeable future. There can be no assurance that qualified personnel will
continue to be available to the Company in sufficient numbers and upon economic
terms acceptable to the Company. See "Business -- Contract Services Division"
and "Business -- Competition."
ABILITY TO ACHIEVE AND MANAGE GROWTH
The Company has experienced growth, driven primarily by industry trends
toward the increased use of temporary professional and technical personnel. The
Company's continued growth depends on a number of factors, including the ability
to maintain margins in the face of competitive pressures and changing regulatory
environments, the availability of sufficient working capital, continued
improvements in the recruitment, motivation, and retention of its operating
employees, and the strength of demand in the Company's markets. Any significant
delay in opening new Company-owned locations could have a material adverse
effect on the Company's results of operations. There can be no assurance that
the Company will be able to attain its desired levels of growth. See
"Business -- Growth Strategy."
IMPLEMENTATION OF ACQUISITION STRATEGY
The Company plans to pursue acquisitions of specialty staffing services
firms. There can be no assurance that the Company will be able to successfully
identify suitable acquisition candidates, complete acquisitions, integrate
acquired businesses into its operations, or expand into new markets. Once
integrated, acquisitions may not achieve comparable levels of revenues,
profitability or productivity as the existing Company-owned locations or
otherwise perform as expected. The Company is unable to predict whether or when
any prospective acquisition candidate will become available or the likelihood
that any acquisition will be
6
<PAGE> 9
completed. The Company competes for acquisition and expansion opportunities with
entities that have substantially greater resources. In addition, acquisitions
involve a number of special risks, such as diversion of management's attention,
difficulties in the integration of acquired operations and retention of
personnel, unexpected problems or legal liabilities, and tax and accounting
issues, some or all of which could have a material adverse effect on the
Company's results of operations and financial condition. The Company currently
has no definitive arrangements or understandings in effect regarding possible
acquisitions. See "The Company" and "Business -- Growth Strategy."
DEPENDENCE ON CERTAIN CLIENTS
The Company's largest client, GTE Corporation and its affiliates ("GTE"),
accounted for approximately 7.9% and 4.7% of the Company's total revenues in
1995 and the three months ended March 31, 1996, respectively. Although each
division and affiliate of GTE makes its own decisions concerning outside
vendors, the Company believes that the executive management of GTE has the
ability to prohibit dealings with particular vendors. The loss of all or a
significant part of the GTE business could have a material adverse effect on the
Company's business. The Company's ten largest clients accounted for
approximately 17.8% of the Company's total revenues during 1995, and for
approximately 19.0% of the Company's total revenues during the three months
ended March 31, 1996. The loss of or material reduction of revenues from any
significant client could have a material adverse effect on the Company. The
Company provides services on an assignment-by-assignment basis and a client can
terminate an assignment at any time. Accordingly, there can be no assurance that
existing clients will continue to use the Company's services at historical
levels, if at all.
COMPETITION
The Company faces significant competition in the markets it serves and
there are limited barriers to entry by new competitors. The Company competes for
potential clients with providers of outsourcing services, systems integrators,
computer systems consultants, other providers of staffing services, temporary
personnel agencies, and search firms. National clerical firms and accounting
firms have begun to penetrate the Company's target markets. A number of the
Company's competitors possess substantially greater resources than the Company.
From time to time the Company has experienced significant pressure from its
clients to reduce its price levels. The Company also faces the risk that certain
of its current and prospective clients will decide to provide similar services
internally. Additionally, the Company faces significant competition for
candidates in many professional and technical specialties. There can be no
assurance that the Company will be able to continue to compete effectively with
existing or potential competitors. See "Business -- Competition."
RELIANCE ON KEY EXECUTIVES AND QUALIFIED OPERATING EMPLOYEES
The Company is highly dependent on its management. The Company expects that
its continued success will largely depend upon the efforts and abilities of
David L. Dunkel, the Company's President and Chief Executive Officer and certain
other executives. The loss of services of Mr. Dunkel or any other key executive
for any reason could have a material adverse effect upon the Company. The
Company maintains key man life insurance with respect to Mr. Dunkel. See
"Management." The Company's success also depends upon its ability to identify,
develop, and retain qualified operating employees, particularly management and
client servicing employees. The Company expends significant resources in
recruiting and training its employees, and the pool of available applicants for
these positions is limited. There can be no assurance that the Company will
continue to be able to identify, develop, and retain qualified operating
management and client servicing employees. In addition, the loss of some of the
Company's operating management and client servicing employees could have an
adverse effect on the Company's operations, including the Company's ability to
establish and maintain client relationships.
EMPLOYMENT LIABILITY RISK
Providers of staffing services employ and place people in the workplaces of
other businesses. An inherent risk of such activity includes possible claims of
errors and omissions, misuse of client proprietary information, misappropriation
of funds, discrimination and harassment, employment of illegal aliens, theft of
client
7
<PAGE> 10
property, other criminal activity or torts, and other claims. It is difficult to
define with precision the possible circumstances that may lead to claims against
the Company relating to the actions of its personnel. Perceived damages to the
Company's clients could arise from a variety of alleged mistakes or failures to
act by personnel placed by the Company (e.g., the alleged negligent action or
inaction of a computer technician could be perceived to cause disruption to a
client's management information systems or the alleged mistake of an accountant
could be perceived to result in a client's financial statements being
inaccurate). In some instances, the Company, pursuant to written contracts with
certain clients, is required to indemnify such clients against some or all of
the foregoing matters. A failure of any Company employee or personnel to observe
the Company's policies and guidelines intended to reduce exposure to these
risks, relevant client policies and guidelines, or applicable federal, state, or
local laws, rules and regulations, or other circumstances that cannot be
predicted, could result in negative publicity, injunctive relief, and the
payment by the Company of monetary damages or fines, or have other material
adverse effects upon the Company. Moreover, the Company could be held
responsible for the actions at a workplace of persons not under the direct
control of the Company. There can be no assurance that the Company will not
experience such problems in the future.
Moreover, the Company is also exposed to potential claims with respect to
the placement process. Because of legal constraints and considerations, the
Company has found it increasingly difficult to perform background
investigations. To reduce its exposure, the Company maintains insurance and
fidelity bonds covering general liability, workers' compensation claims, errors
and omissions, and employee theft. There can be no assurance that such insurance
coverage will continue to be available economically in amounts adequate to cover
any such liability. See "Business -- Legal Proceedings" and
"Business -- Insurance."
RELIANCE ON INFORMATION PROCESSING SYSTEMS
The Company's business depends upon its ability to store, retrieve,
process, and manage significant databases, and periodically to expand and
upgrade its information processing capabilities. The Company's computer
equipment and software systems are maintained at its Tampa, Florida
headquarters. Interruption or loss of the Company's information processing
capabilities through loss of stored data, breakdown or malfunction of computer
equipment and software systems, telecommunications failure, conversion
difficulties, or damage to the Company's headquarters and systems caused by
fire, hurricane, lightning, electrical power outage, or other disruption could
have a material adverse effect on the Company. The Company recently has
experienced problems with computer hardware supplied by a vendor. See "Business
-- Professional Recruiters Operating System" and "Business -- Litigation."
INCREASED COSTS FROM GOVERNMENT REGULATION
The Company is required to pay a number of federal, state, and local
payroll and related costs, including unemployment taxes, workers' compensation
and insurance, FICA, and Medicare, among others, for its employees and
personnel. Significant increases in the effective rates of any payroll related
costs likely would have a material adverse effect upon the Company. The
Company's costs could also increase as a result of health care reforms or the
possible imposition of additional requirements and restrictions related to the
placement of personnel. Recent federal and state legislative proposals have
included provisions extending health insurance benefits to personnel who
currently do not receive such benefits. There can be no assurance that the
Company will be able to increase the fees charged to its clients in a timely
manner and in a sufficient amount to cover increased costs, if any such
proposals are adopted. There is also no assurance that the Company will be able
to adapt to future regulatory changes made by the Internal Revenue Service, the
Department of Labor, or other state and federal regulatory agencies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
MANAGEMENT DISCRETION CONCERNING USE OF PROCEEDS
The Company intends to use the net proceeds of the Offering for general
corporate purposes including expansion of the Company's operations, purchase of
capital equipment, and possible acquisitions. Accordingly, management will have
substantial discretion in spending the proceeds to be received by the Company.
8
<PAGE> 11
Pending such uses, the net proceeds will be invested in short-term, investment
grade securities, certificates of deposit, or direct guaranteed obligations of
the United States government. See "Use of Proceeds."
ANTI-TAKEOVER PROVISIONS
The Company's articles of incorporation and bylaws and Florida law contain
provisions that may have the effect of inhibiting a non-negotiated merger or
other business combination. In particular, the Company's articles of
incorporation provide for a staggered board of directors and permit the removal
of directors only for cause. Additionally, management may issue up to 15,000,000
shares of preferred stock, and fix the rights and preferences thereof, without a
further vote of the shareholders. In addition, the Company's officers have
employment agreements with the Company containing certain provisions that call
for substantial payments to be made to such officers upon any change in control
of the Company. Certain of these provisions may discourage a future acquisition
of the Company, including an acquisition in which shareholders might otherwise
receive a premium for their shares. As a result, shareholders who might desire
to participate in such a transaction may not have the opportunity to do so.
Moreover, the existence of these provisions may have a depressive effect on the
market price of the Common Stock. See "Management -- Employment Agreements,"
"Description of Capital Stock -- Certain Provisions of the Company's Articles of
Incorporation" and "Description of Capital Stock -- Certain Provisions of
Florida Law."
POSSIBLE VOLATILITY OF STOCK PRICE
The Common Stock has experienced a significant increase in its market price
since the Company's initial public offering in August 1995. The market price of
the Common Stock could be subject to significant fluctuations in response to
operating results of the Company, changes in general conditions in the economy,
the financial markets, the employment services industry, or other developments
affecting the Company, its clients, or its competitors, some of which may be
unrelated to the Company's performance.
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
Common Stock or the availability of additional Common Stock for sale in the
public market as a result of this offering will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock (including shares issued upon the exercise of options) in the
public market following the Offering, or the perception that such sales could
occur, could adversely affect prevailing market prices of the Common Stock. Upon
completion of the Offering, the Company will have 11,264,782 shares of Common
Stock outstanding. Of this amount, 6,357,624 shares (6,753,624 shares if the
Underwriters' over-allotment is exercised in full) will be freely tradeable
without restriction. The remaining 4,907,158 shares will be "Restricted
Securities" and may only be sold pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or an applicable
exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144. These shares will be eligible for sale
pursuant to Rule 144 on September 1, 1996. See "Principal and Selling
Shareholders," "Shares Eligible for Future Sale" and "Underwriting."
9
<PAGE> 12
THE COMPANY
Romac International, Inc. was formed in August 1994 as a result of the 1994
Combination. The 1994 Combination was initiated by the largest franchisee whose
management assumed control of the combined Company and the ROMAC(R) name. This
management group implemented the integration of the predecessor companies and
realized significant operating efficiencies. Management believes that the
integration enhanced the Company's ability to achieve uniform quality,
servicing, and pricing standards in providing its specialized services and
provides a strong base from which to expand.
Since the Company's initial public offering in August 1995, the Company has
consummated the Acquisitions. The Acquisitions have enhanced the Company's
Contract Services capabilities, increased the Company's geographic presence, and
introduced outplacement services and human resource contract and outsourcing, to
the Company's existing product offerings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The Company's principal office is located at 120 West Hyde Park Place,
Suite 200, Tampa, Florida 33606, and its telephone number is (813) 258-8855.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,610,000 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $18.25 per share (after deducting underwriting discounts and commissions and
estimated offering expenses) are estimated to be approximately $27.3 million
(approximately $34.1 million if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use its net proceeds from the Offering for expansion
of the Company's lines of service in existing Company-owned locations, for the
opening of new Company-owned locations, for possible acquisitions, and for
general corporate purposes. Pending such uses, the net proceeds will be invested
in short term, investment grade securities, certificates of deposit, or direct
or guaranteed obligations of the United States government. The Company is
currently in discussions with one of its franchisees for the purchase of certain
of its assets. There can be no assurance that this possible acquisition will be
consummated. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
The Company will not receive any proceeds from the sale of the shares
offered by the Selling Shareholders. See "Principal and Selling Shareholders."
DIVIDEND POLICY
The Company does not intend for the foreseeable future to declare or pay
any cash dividends and intends to retain earnings, if any, for the future
operation and expansion of the Company's business.
10
<PAGE> 13
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the periods indicated, the range of
high and low closing sale prices for the Common Stock, as reported on the Nasdaq
National Market since trading began on August 15, 1995, under the symbol ROMC.
The table has been adjusted to reflect a two-for-one stock split in the form of
a 100% stock dividend to shareholders of record on May 15, 1996 and which will
be reflected on the Nasdaq National Market on May 23, 1996.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Third Quarter 1995 (from August 15, 1995)*................................. $ 8.875 $ 7.125
Fourth Quarter 1995........................................................ 11.750 8.188
First Quarter 1996......................................................... 16.125 11.500
Second Quarter 1996 (through May 6, 1996).................................. 18.750 15.000
------- -------
</TABLE>
- ---------------
* The Company's initial public offering occurred on August 14, 1995 at a price
of $6.25 per share.
On April 30, 1996, the Common Stock was held by approximately 1,660 holders
of record. For a recent closing sale price for the Common Stock on the Nasdaq
National Market, see the cover page of this Prospectus.
CAPITALIZATION
The table below sets forth the capitalization of the Company at March 31,
1996, and as adjusted at that date to give effect to the sale of the 1,610,000
shares of Common Stock offered by the Company hereby (at an assumed public
offering price of $18.25 per share) the application of the estimated net
proceeds therefrom. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................ $ 589 $27,855
======= =======
Current portion of long-term debt........................................ $ 257 $ 257
======= =======
Long-term debt........................................................... $ 425 $ 425
------- -------
Shareholders' equity:
Preferred Stock, $.01 par value; 15,000,000 shares authorized; no
shares issued....................................................... $ -- $ --
Common Stock, $.01 par value; 15,000,000 shares authorized; 9,983,156
shares issued; 11,593,156 shares issued, as adjusted(1)............. 100 116
Additional paid-in capital............................................. 13,301 40,551
Retained earnings...................................................... 5,620 5,620
Stock subscription receivables......................................... (18) (18)
Reacquired stock at cost: 338,374 shares............................... (925) (925)
------- -------
Total shareholders' equity..................................... 18,078 45,344
------- -------
Total capitalization........................................... $18,503 $45,769
======= =======
</TABLE>
- ---------------
(1) Does not include 1,230,970 shares of Common Stock subject to outstanding
options under the Company's stock option plans. See
"Management -- Incentive Stock Option Plan" and "Management -- Director
Compensation."
11
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included elsewhere in this Prospectus. The balance sheet data as
of December 31, 1993, 1994 and 1995 and the operating statement data for each of
the years ended December 31, 1992, 1993, 1994 and 1995, are derived from the
audited Consolidated Financial Statements of the Company. The balance sheet data
as of December 31, 1991 and 1992 and March 31, 1995 and 1996 and the operating
statement data for of the year ended December 31, 1991 and for the three months
ended March 31, 1995 and 1996, have been derived from the unaudited Consolidated
Financial Statements of the Company, which have been prepared on the same basis
as the audited Consolidated Financial Statements, and, in the opinion of
management, include all adjustments that are necessary for a fair statement of
the results for such periods.
During the first quarter of 1996, the Company completed the Acquisitions.
The pro forma statement of operations data gives effect to the Acquisitions as
if they had occurred on January 1, 1995. The following information should be
read in conjunction with the Consolidated Financial Statements and notes thereto
included elsewhere herein, and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," appearing elsewhere in this
Prospectus. This information has been adjusted to reflect a two-for-one stock
split in the form of a 100% stock dividend to shareholders of record on May 15,
1996 and which will be reflected on the Nasdaq National Market on May 23, 1996.
<TABLE>
<CAPTION>
THREE MONTHS PRO FORMA
PRO FORMA ENDED THREE MONTHS
YEARS ENDED DECEMBER 31, YEAR ENDED MARCH 31, ENDED
----------------------------------------------- DECEMBER 31, ---------------- MARCH 31,
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
------- ------- ------- ------- ------- ------------ ------ ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net service revenues...... $24,155 $31,250 $40,346 $40,789 $45,655 $ 58,368 $9,562 $16,889 $ 18,355
Direct cost of services... 13,536 19,832 26,126 24,851 25,460 30,905 5,359 9,719 10,543
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit........ 10,619 11,418 14,220 15,938 20,195 27,463 4,203 7,170 7,812
Selling, general and
administrative
expenses................ 10,702 9,690 12,775 15,009 15,232 21,088 3,362 5,372 5,910
Depreciation and
amortization expense.... 439 302 298 248 512 1,025 89 236 282
Combination expenses...... -- -- -- 2,251 -- -- -- -- --
Other (income) expense,
net(2).................. 237 335 34 (1,157) (570) (368) (460) (147) (149)
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before taxes
and minority interest... (759) 1,091 1,113 (413) 5,021 5,718 1,212 1,709 1,769
Provision (benefit) for
taxes................... (236) 330 448 186 2,008 2,287 485 684 708
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
minority interest....... (523) 761 665 (599) 3,013 3,431 727 1,025 1,061
Minority interest in
subsidiary income....... (65) 47 15 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)(2)...... $ (458) $ 714 $ 650 $ (599) $ 3,013 $ 3,431 $ 727 $ 1,025 $ 1,061
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per
share(3)................ $ (0.07) $ 0.11 $ 0.10 $ (0.09) $ 0.36 $ 0.40 $ 0.09 $ 0.10 $ 0.10
======= ======= ======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding............. 6,522 6,588 6,619 7,039 8,488 8,488 7,763 10,338 10,338
OTHER DATA:
Number of locations
operated at period end:
Company-owned........... 9 8 7 6 9 10 8 11 11
Franchised/licensed..... 26 23 19 15 7 7 9 6 6
</TABLE>
(continued on next page)
12
<PAGE> 15
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $1,487 $2,074 $2,579 $2,093 $13,895 $2,367 $ 9,026
Total assets.............................................. 4,986 5,908 6,135 6,984 20,952 8,614 23,168
Total long-term debt...................................... 563 314 92 24 500 1,195 425
Shareholders' equity...................................... 1,956 2,489 3,074 2,435 16,924 3,181 18,078
</TABLE>
- ---------------
(1) The pro forma unaudited pro forma consolidated financial information has
been prepared to reflect the Company's operations as if the Acquisitions had
occurred on January 1, 1995, as further described elsewhere herein. See
"Unaudited Pro Forma Consolidated Financial Information."
(2) Net income (loss) for the years ended December 31, 1994 and 1995, the pro
forma year ended December 31, 1995, the three months ended March 31, 1995
and 1996, and the pro forma three months ended March 31, 1996, includes
franchise termination income (net of tax) of $336,000, $261,000, $261,000,
$261,000, $64,000, and $64,000, respectively.
(3) Net income (loss) per share for the years ended December 31, 1994 and 1995,
the pro forma year ended December 31, 1995, the three months ended March 31,
1995 and 1996, and the pro forma three months ended March 31, 1996, includes
franchise termination income per share of $0.05, $0.03, $0.03, $0.03, $0.01,
and $0.01, respectively.
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in connection with the Company's
Consolidated Financial Statements and the related notes thereto incorporated by
reference herein.
OVERVIEW
The Company is a specialty staffing services firm providing temporary,
contract, and permanent placement of professional and technical personnel. The
Company currently operates in twelve metropolitan markets through Company-owned
locations and five additional metropolitan markets through franchised and
licensed locations. The Company offers its services through its three divisions,
the Professional Temporary Division, the Contract Services Division and the
Search Division.
Strategy
The Company's objective is to be the nationally recognized leader in
providing specialty staffing services. The Company strives to differentiate
itself from others in the staffing industry through innovative service
offerings, a consultative and results-oriented approach to client relationships,
and high-quality personnel placements. In pursuing its objective, the Company
focuses exclusively on providing professional and technical personnel, rather
than clerical or light industrial personnel, because of the generally higher
profitability and the opportunity for growth of this market segment. The Company
believes it has a recruiting advantage over those of its competitors that lack
the ability to offer candidates temporary, contract, and permanent
opportunities. Candidates seeking permanent employment frequently accept
temporary or contract assignments through the Company until a permanent position
becomes available. The Company also believes the ROMAC(R) name recognition,
coupled with its industry expertise and innovative use of technology, provide it
with competitive benefits.
Since the Company's initial public offering in August 1995, the Company has
introduced Contract Services in its Philadelphia and Chicago locations,
introduced Search services in its Houston location, and expanded into the
Pittsburgh market through a new Company-owned location. The Company has also
consummated the Acquisitions. These strategic acquisitions have enhanced the
Company's Contract Services capabilities, increased the Company's geographic
presence, and added human resource contract and outsourcing, and outplacement
services, to the Company's existing product offerings.
Revenue Recognition
Net service revenues consist of sales from Company-owned and licensed
offices, and royalties received from franchised operations, net of credits and
discounts. The Company recognizes revenue from the Professional Temporary and
Contract Services Divisions based on hours worked by assigned personnel on a
weekly basis. Search Division revenues are recognized in contingency search
engagements upon the successful completion of the assignment. In retained search
engagements the initial retainer is recognized upon execution of the agreement,
with the balance recognized on completion of the search. Franchise fees are
determined based upon a contractual percentage of the revenue billed by
franchises. Costs relating to the support of franchised operations are included
in the Company's selling, general and administrative expenses. Under its
licensing arrangements, the Company is the legal employer of temporary and
contract personnel and accordingly includes revenues and related direct costs of
licensed offices in its net service revenues and direct cost of services,
respectively. Commissions paid to licensees are based upon a percentage of the
gross profit generated, and is included in the Company's direct cost of
services.
Gross Profit
Gross profit for the Professional Temporary and Contract Services Divisions
is determined by deducting the direct cost of services (temporary and contract
personnel payroll wages, payroll taxes, payroll-related insurances, and licensee
commissions) from the division's net service revenues. Consistent with industry
practices, the Search Division classifies all costs as selling, general, and
administrative.
14
<PAGE> 17
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net service revenues,
certain items in the Company's consolidated statements of income for the
indicated periods:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER ENDED MARCH
31, 31,
----------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Professional Temporary................................. 60.3% 60.0% 52.5% 55.5% 42.4%
Contract Services...................................... 22.6 20.1 26.0 19.8 37.5
Search................................................. 17.1 19.9 21.5 24.7 20.1
----- ----- ----- ----- -----
Net service revenues.............................. 100.0 100.0 100.0 100.0 100.0
Gross profit........................................... 35.2 39.1 44.2 44.0 42.5
Selling, general, and administrative expenses.......... 31.7 36.8 33.4 35.2 31.8
Income (loss) before taxes and minority interest....... 2.8 (1.0) 11.0 12.7 10.1
Net income (loss)...................................... 1.6% (1.5)% 6.6% 7.6% 6.1%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Net Service Revenues. Net service revenues increased 76.0% to $16.9
million in the first three months of 1996 from $9.6 million in the first three
months of 1995, primarily as a result of a $5.7 million increase in revenue from
existing Company-owned locations and a $1.6 million increase in revenues from
acquired operations.
Professional Temporary Division revenues increased 35.8% to $7.2 million in
the first three months of 1996 from $5.3 million in the first three months of
1995. The increase resulted from an increase in the number of hours billed by
Company-owned operations during the three month period ended March 31, 1996
compared to the same period in 1995. Contract Services Division revenues
increased 231.6% to $6.3 million in the first three months of 1996 from $1.9
million in the first three months of 1995. This increase was a result of a $3.1
million increase in revenues from existing Company-owned operations and a $1.3
million increase in revenues from acquired operations. The increase attributable
to Company-owned operations resulted from an increase in the number of hours
billed during the three months ended March 31, 1996 as compared to the same
period in 1995. Search Division revenues increased 41.7% to $3.4 million in the
first three months of 1996 from $2.4 million in the first three months of 1995,
as a result of a $712,000 increase in revenues from existing Company-owned
operations and a $288,000 increase in revenues from acquired operations. The
increase in Company-owned operations resulted primarily from an increase in the
number of Search Division sales consultants, which increased the number of
placements made by the Search Division during the first three months of 1996 as
compared to the first three months of 1995. Franchise and license revenues,
which are included in the aforementioned division revenues, decreased 6.7% to
$836,000 in the first three months of 1996 from approximately $896,000 in the
first three months of 1995. The decrease was primarily due to the effects of
discontinued franchisee and licensee operations. The average hourly bill rate
for the Professional Temporary and Contract Services Divisions and the average
placement fee for the Search Division remained relatively constant for the
periods involved. The Company opened a new Company-owned location in Pittsburgh
during the three month period ended March 31, 1996.
Gross Profit. Gross profit increased 71.4% to $7.2 million in the first
three months of 1996 from $4.2 million in the first three months of 1995. Gross
profit as a percentage of net service revenues ("gross margin") decreased to
42.5% for the first three months of 1996 from 44.0% for the first three months
of 1995. This decrease was a result of the continuing changes in the Company's
business mix whereby revenues from the Professional Temporary and Contract
Services Divisions, traditionally with lower gross margins than Search Division
revenues, increased to 79.9% of the Company's net service revenues during the
three months ended March 31, 1996 as compared to 75.3% for the same period in
1995.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased 58.8% to $5.4 million in the first three
months of 1996 from $3.4 million in the first three months of 1995.
15
<PAGE> 18
Selling, general and administrative expenses as a percentage of net service
revenues decreased to 31.8% for the first three months of 1996 from 35.2% in the
first three months of 1995. This decrease in selling, general, and
administrative expenses as a percentage of net service revenues resulted from
greater operating efficiencies and economies of scale gained from a larger
revenue base.
Other Income. Other income decreased to approximately $147,000 in the
first three months of 1996 from approximately $461,000 in the first three months
of 1995. The decrease was primarily due to a decrease in franchise termination
fees. Franchise termination income of approximately $107,000 was recorded in the
first three months of 1996 as compared to $435,000 during the same period in
1995. See "Business -- Markets and Organizational Structure."
Income Before Taxes. Income before taxes increased 41.7% to $1.7 million
in the first three months of 1996 from $1.2 million in the first three months of
1995, primarily as a result of the above factors.
Provision for Taxes. Provision for taxes in the first three months of 1996
was approximately $684,000 as compared to $485,000 in the first three months of
1995. The effective income tax rate was constant at approximately 40.0% for the
three months ended March 31, 1996 and 1995.
Net Income. Net income increased to $1.0 million in the first three months
of 1996 from $727,000 in the first three months of 1995, primarily as a result
of the above factors.
1995 COMPARED TO 1994
Net Service Revenues. Net service revenues increased approximately 12.0%
to $45.7 million in 1995 from $40.8 million in 1994. The overall increase in net
service revenues takes into account an approximately $3.9 million decrease in
net service revenues from franchisee and licensee operations for 1995 as
compared to 1994, as several franchisee and licensee operations were
discontinued at the end of 1994.
Professional Temporary Division revenues decreased approximately 2.0% to
$24.0 million in 1995 from $24.5 million in 1994. This decrease takes into
account an approximately $3.7 million decrease in professional temporary
revenues from franchisee and licensee operations for 1995 as compared to 1994,
as several professional temporary franchisee and licensee operations were
discontinued at the end of 1994. This decrease in revenues was attributable to a
decrease in the number of professional temporary hours billed in 1995 as
compared to 1994. Contract Services Division revenues increased approximately
45.1% to $11.9 million in 1995 from $8.2 million in 1994. This increase in
revenues was attributable to an increase in the number of Contract Service
Division hours billed in 1995 as compared to 1994. Search Division revenues
increased approximately 21.0% to $9.8 million in 1995 from $8.1 million in 1994.
This increase was primarily attributable to an increase in search sales
consultants and an improved economic environment which increased the number of
Search Division placements made in 1995 as compared to 1994. Franchise and
license revenues which are included in the aforementioned revenues, decreased
approximately 45.3% to $4.7 million in 1995 from $8.6 million in 1994. The
decrease was primarily attributable to the termination of four franchise and
license arrangements during the later part of 1994, offset in part by the growth
in existing service lines of continuing licensed operations.
After taking into account the decreases in net service revenues
attributable to discontinued franchisee and licensee operations, the net service
revenues grew by approximately $4.9 million, reflecting a continued improvement
in demand for the Company's specialized staffing services. The average hourly
bill rate for the Professional Temporary and Contract Services Divisions and the
average placement fee for the Search Division remained relatively constant for
all the periods involved. The Company opened three new Company-owned locations
during 1995: Dallas in February; Philadelphia in March; and Houston in November.
Gross Profit. Gross profit increased approximately 27.0% to $20.2 million
in 1995 from $15.9 million in 1994. Gross margin increased to 44.2% in 1995 from
39.1% in 1994. The increase in gross margin resulted from the combined effects
of the decrease in franchisee and licensee revenue at lower margins and the
increase in Search Division revenue at higher margins.
16
<PAGE> 19
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased approximately 1.3% to $15.2 million in 1995
from $15.0 million in 1994. Selling, general and administrative expenses as a
percentage of net service revenues decreased to 33.3% in 1995 from 36.8% in
1994. This decrease in selling, general and administrative expenses as a
percentage of net service revenues resulted from greater operating efficiencies
and economies of scale gained from a larger revenue base, along with expense
savings arising from the 1994 Combination.
Combination Expenses. The Company did not incur any combination expenses
in 1995 as compared to approximately $2.3 million of advisory services,
severance costs and other expenses related to the 1994 Combination that were
incurred in 1994.
Other Income. Other income decreased to $570,000 in 1995 from
approximately $1.2 million in 1994. The decrease was primarily due to a decrease
in franchise termination fees. Franchise termination income of approximately
$435,000 was recorded in 1995 as compared to $560,000 in 1994. In addition, the
Company received $500,000 in proceeds from a life insurance policy on a deceased
Company employee in 1994.
Income (Loss) Before Taxes. Income before taxes increased to $5.0 million
in 1995 from a loss of $413,000 in 1994, primarily as a result of the above
factors.
Provision for Taxes. Provision for taxes for 1995 was approximately $2.0
million or 40.0% of income before income taxes as compared to $186,000 for 1994.
Although the Company had an operating loss for financial reporting purposes in
1994, it had income tax expense of $186,000 primarily due to non-deductible
advisory fees related to the Combination.
Net Income (Loss). Net income increased to $3.0 million in 1995 from a
loss of $599,000 in 1994, primarily as a result of the above factors.
1994 COMPARED TO 1993
Net Service Revenues. Net service revenues increased 1.2% to $40.8 million
in 1994 from $40.3 million in 1993. In 1994, management focused its efforts on
effecting the 1994 Combination and restructuring the Company. These efforts
included the renegotiation of franchise and license agreements, the
implementation of uniform operating procedures and policies, training employees
of companies involved in the 1994 Combination, hiring additional employees and
the consolidation of the Company's operations.
Professional Temporary Division revenues increased 0.8% to $24.5 million in
1994 from $24.3 million in 1993. Contract Services Division revenues decreased
9.9% to $8.2 million in 1994 from $9.1 million in 1993. The decrease resulted
primarily from the reallocation of resources from one of the Company's lower
margin customers, which decreased the number of hours billed by the Contract
Services Division during 1994 as compared to 1993. Search Division revenues
increased 17.4% to $8.1 million in 1994 from $6.9 million in 1993. The increase
was primarily attributable to an increase in Search Division sales consultants,
an expansion of services offered, and an improved economic environment, which
increased the number of placements made by the Search Division during 1994 as
compared to 1993. Franchise and license revenues, which are included in the
aforementioned division revenues, increased 19.4% to $8.6 million in 1994 from
$7.2 million in 1993. The increase was primarily attributable to the growth in
existing service lines of licensee operations, offset by the termination of four
franchise and license arrangements. The average hourly bill rate for the
Professional Temporary and Contract Services Divisions and the average placement
fee for the Search Division remained relatively constant for the periods
involved. The Company did not open any Company-owned locations in new markets in
1994.
Gross Profit. Gross profit increased 12.0% to $15.9 million in 1994 from
$14.2 million in 1993. Gross margin increased to 39.1% in 1994 from 35.2% in
1993. The increase was attributable to the increased proportion of Search
Division revenues to total revenues as Search Division revenues generate higher
gross margins than Professional Temporary and Contract Services Divisions
revenues.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased 17.2% to $15.0 million in 1994 from $12.8
million in 1993. The increase in selling, general and administrative
17
<PAGE> 20
expenses was due primarily to the hiring of additional operating employees
necessary for parallel operations during the transition period after the
Combination, an increase in commissions associated with the increase in Search
Division revenues, and the payment of approximately $1.7 million in
non-recurring compensation expense.
Combination Expenses. In 1994, the Company recorded an expense of $2.3
million related to advisory services, severance costs and other expenses
associated with the Combination.
Other (Income) Expense. Other (income) expense increased to $1.2 million
of income in 1994 from $34,000 of expense in 1993. The increase was primarily
due to franchise termination fees. Franchise termination income of approximately
$560,000 was recorded in 1994. In addition, the Company received $500,000 in
proceeds from a life insurance policy on a deceased Company employee in 1994.
Income (Loss) Before Taxes. Income from operations decreased to a loss of
$413,000 in 1994 from income of $1.1 million in 1993, primarily as a result of
the above factors.
Provision for Taxes. Although the Company had an operating loss for
financial reporting purposes in 1994, it had income tax expense of approximately
$186,000 as compared to $448,000 in 1993. The primary reason for the income tax
expense in 1994, despite operating losses, was the non-deductibility of advisory
fees relating to the 1994 Combination.
Net Income (Loss). Net income (loss) decreased to a loss of $599,000 in
1994 from $650,000 of income in 1993, primarily as a result of the above
factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of cash have been the proceeds of its
initial public offering, internally generated funds, and borrowings.
The Company completed its initial public offering of 2,080,000 shares of
Common Stock on August 14, 1995. The proceeds of $11,402,146 (net of
underwriters' discounts and other offering costs) were used for paying down
debt, financing capital improvements, general working capital purposes, and
financing business acquisitions.
The purchase price for the Acquisitions was approximately $5.9 million in
the aggregate and is subject to adjustment based upon attainment of certain
operating results of the acquired companies. The respective purchase agreements
require certain payments based on the earnings before income taxes for the
acquired company that are in excess of certain earnings levels. Such additional
purchase price payments, if made, will be reflected as additional goodwill and
amortized over the remaining life of the asset. See "Unaudited Pro Forma
Consolidated Financial Information."
The Company's principal use of cash is to fund payroll expenses and
accounts receivable. Professional Temporary Division and Contract Services
Division personnel are paid weekly for their services, whereas customer payments
are generally received within 45 to 60 days from date of invoice. As new offices
are established or acquired, or as existing offices expand, there will be
increasing requirements for cash resources to fund operations. The start-up of
services by the Professional Temporary or Contract Services Division in a new or
existing Company-owned location has generally required expenditures of up to
$175,000 before generating positive cash flow. Historically, such new operations
have achieved operating profitability within nine months of inception but have
not contributed significant revenue for the first 12 to 18 months.
For the three months ended March 31, 1996, the Company had negative cash
flow from operations of approximately $1.2 million, primarily as the result of
an increase in the Company's accounts receivable. During March 1996, the Company
entered into a new unsecured line of credit agreement with NationsBank, N.A.
(South). This agreement provides for up to $5.0 million of working capital to
the Company for general corporate purposes. This agreement matures on March 13,
1997 and bears interest at 150 basis points above the London Interbank Offering
Rate (LIBOR). The total amount that may be outstanding under this agreement is
limited to specified percentages of accounts receivable. This agreement contains
restrictive covenants and requires the maintenance of certain financial ratios.
As of March 31, 1996, no borrowings were
18
<PAGE> 21
outstanding under this facility. Prior to entering into this new agreement, the
Company terminated its previous line of credit.
The Company intends to use the net proceeds from the Offering for expansion
of the Company's lines of service in existing Company-owned locations, for the
opening of new Company-owned locations, for possible acquisitions, and for
general corporate purpose. Pending such uses, the net proceeds will be invested
in short term, investment grade securities, certificates of deposit, or direct
or guaranteed obligations of the United States government.
The Company has entered into discussions regarding the possible purchase of
certain of the assets of one of its franchisees. In August 1995, the relevant
franchise agreement was amended (the "Amendment") to provide the Company with an
option to terminate the franchise arrangement upon 90 days notice, provided that
substantially all of the assets of the franchisee are purchased by the Company.
The purchase price established by the Amendment is determined by a formula, with
a minimum purchase price of $3.0 million. There can be no assurance that this
possible acquisition will be consummated. See "Use of Proceeds."
The Company believes that the net proceeds from the Offering, combined with
cash flows from operations and credit facilities, will be adequate to meet its
capital requirements for at least the remainder of 1996.
19
<PAGE> 22
BUSINESS
GENERAL
Romac International, Inc. is a specialty staffing services firm providing
temporary, contract, and permanent placement of professional and technical
personnel. The Company is organized into three divisions: the Professional
Temporary Division provides professional temporary personnel in the fields of
finance and accounting; the Contract Services Division provides information
systems, manufacturing services, human resources, health care, and
pharmaceutical personnel generally on a longer-term contractual basis; and the
Search Division provides permanent placement of specialized personnel in the
fields of accounting and finance, information systems, financial services,
pharmaceutical research, health care, human resources, insurance, manufacturing
services, and sales and marketing. The Company believes its range of services
provides clients with integrated solutions to their temporary, contract, and
permanent specialty staffing needs, allowing the Company to develop long-term,
consultative relationships with its clients. The Company also believes the
interaction among its three divisions generates increased placement
opportunities and enhances the Company's ability to attract and place higher
quality candidates. The Company principally serves Fortune 1000 companies in
twelve metropolitan markets through Company-owned locations and five additional
markets through franchisees and licensees.
The Company's objective is to be the nationally recognized leader in
providing specialty staffing services. The Company strives to differentiate
itself from others in the staffing industry through innovative service
offerings, a consultative and results-oriented approach to client relationships,
and high-quality personnel placements. In pursuing its objective, the Company
focuses exclusively on providing professional and technical personnel, rather
than clerical or light industrial personnel, because of the generally higher
profitability and the opportunity for growth of this market segment. The Company
believes it has a recruiting advantage over those of its competitors that lack
the ability to offer candidates temporary, contract, and permanent
opportunities. Candidates seeking permanent employment frequently accept
temporary or contract assignments through the Company until a permanent position
becomes available. The Company also believes the ROMAC(R) name recognition,
coupled with its industry expertise and innovative use of technology, provide it
with competitive benefits.
The Company's growth strategy is to increase revenue and profitability by
expanding its services in existing markets and introducing its full range of
services into new markets. In existing markets, the Company intends to further
develop existing clients and expand its client base by (i) introducing its full
range of services in all of its markets, (ii) taking advantage of the
cross-selling opportunities provided by the complementary services offered by
its three divisions, (iii) introducing new services, and (iv) acquiring
complementary businesses. The Company intends to enter new markets by opening
new Company-owned locations and making strategic acquisitions. In the last
twelve months, the Company has entered four new markets: two through start-ups,
one through franchise conversion to a Company-owned location, and one through
acquisition. In addition, the Company has developed a major accounts program,
which encourages large users of staffing services to "carve-out" the
professional and technical segments of staffing contracts and award such
business to the Company instead of large generalist staffing firms. As a result
of this program, the Company has signed several contracts with major national
corporations for certain of the Company's services. Management believes there is
substantial opportunity for growth through the continued implementation of this
strategy.
INDUSTRY OVERVIEW
The temporary employment service industry has experienced significant
growth in response to the changing work environment in the United States.
Fundamental changes in the employer-employee relationship continue to occur,
with employers developing increasingly stringent criteria for permanent
employees while moving toward project-oriented temporary and contract hiring.
This trend has been advanced by increasing automation that has resulted in
shorter technological cycles and by global competitive pressures. Many employers
have responded to these challenges by turning to temporary and contract
personnel to keep personnel costs variable, to achieve maximum flexibility, to
outsource highly specialized skills, and to avoid the negative effects of
layoffs.
20
<PAGE> 23
Rapidly changing regulations concerning employee benefits, health
insurance, and retirement plans and the highly competitive business climate have
also prompted many employers to take advantage of the flexibility offered
through temporary and contract staffing. Additionally, Internal Revenue Service
and Department of Labor regulations concerning the classification of employees
and independent contractors have significantly increased demand by prompting
many independent contractors to affiliate with employers like the Company.
The temporary staffing industry has grown rapidly in recent years as
companies have utilized temporary employees to manage personnel costs while
meeting specialized or fluctuating staffing requirements. According to a study
by the National Association of Temporary and Staffing Services ("NATSS"), the
United States temporary staffing industry grew from approximately $20.4 billion
in revenue in 1991 to approximately $39.2 billion in revenue in 1995, a compound
annual growth rate of 17.7%. One of the fastest growing sectors for the Company,
as well as the industry, is information technology services. According to the
Staffing Industry Report, 1995 revenue for this sector is estimated to have been
$8.9 billion, a 25.0% increase over 1994. The Company believes that professional
and technical staffing within the temporary staffing industry requires
longer-term, more highly-skilled personnel services and offers the opportunity
for higher profitability than the clerical and light industrial staffing
segments, because of the value-added nature of professional and technical
staffing personnel. NATSS has estimated that more than 90.0% of all U.S.
businesses utilize temporary staffing services.
BUSINESS STRATEGY
The Company's objective is to be a nationally recognized leader in
providing its specialty staffing services. The key elements of the Company's
business strategy in seeking to achieve this objective include:
Focus on Specialty Staffing. The Company focuses exclusively on providing
specialty staffing services to its clients. The Company believes that providing
these specialty services to its clients offers greater profitability than the
clerical and light industrial sectors of the temporary staffing industry. In
addition, the Company believes, based upon data published by the U.S. Bureau of
Labor Statistics and other sources, that employment growth will be greater in
the Company's sectors than in the traditional clerical and light industrial
sectors. The placement of highly skilled personnel requires a distinct
operational knowledge to effectively recruit and screen candidates, match them
to client needs, and develop and manage client relationships. The Company
believes its historical focus in this market and name recognition, combined with
management's operating expertise, provide it with a competitive advantage.
Build Long-Term, Consultative Relationships. The Company has developed
long-term relationships with its clients by providing integrated solutions to
their specialty staffing requirements. Romac strives to differentiate by working
closely with its clients to maximize their return on human assets. In addition,
the Company's ability to offer a broad range of temporary and contract personnel
services coupled with its permanent placement capability, offers the client a
single-source provider of specialty staffing services. This ability enables the
Company to emphasize consultative rather than transactional client
relationships.
Segment Specialty Needs. The Company has begun implementation of its
"carve-out" marketing strategy, which encourages large contractors of staffing
services to "carve-out" the professional and technical sectors of staffing
contracts and award such business to specialty staffing services providers
instead of large generalist staffing firms. As a result of this strategy the
Company has signed several contracts with major national corporations for
certain of the Company's services. Management believes there is substantial
opportunity for growth through the continued implementation of this strategy.
Achieve Extensive Client Penetration. The Company's client development
process focuses on repeated contacts with client personnel responsible for
staffing decisions. Contacts are made within numerous functional departments and
at many different organizational levels within the client. The Company's
operating employees are trained to develop a thorough understanding of each
client's total staffing requirements. In addition, although the Company is
organized divisionally its employees are trained and incentivized to recognize
cross-selling opportunities for all of the Company's other divisions.
Apply Innovative Technology. The Company utilizes proprietary technologies
and processes in the staffing, marketing, and management of its operations. The
Company's Professional Recruiters Operating
21
<PAGE> 24
System ("PROS") provides operating employees with a systematic approach to
identifying, monitoring, and serving the needs of the Company's clients. Once
operating employees obtain information regarding a client's environment, the
data is entered into the Company's integrated operating system and is coded for
future follow-up. Operating employees are then prompted by means of an automated
planner to contact the client periodically to monitor and service the needs that
have been identified. The Company's emphasis on the utilization of technology
has resulted in the delivery of higher quality service, greater operating
efficiency, and increased employee productivity. See "Business -- Professional
Recruiters Operating System."
Recruit High-Quality Professionals. The Company places great emphasis on
recruiting qualified temporary, contract, and permanent placement candidates.
The Company believes it has a recruiting advantage over those of its competitors
that lack the ability to offer candidates both temporary, contract and permanent
opportunities. Candidates seeking permanent employment frequently accept
temporary or contract assignments through the Company until a permanent position
becomes available. Each candidate is screened by an operating employee with a
compatible technical background to determine qualifications and match them with
client needs.
Encourage Operating Employee Achievement. The Company's management
promotes a quality-focused, results-oriented culture. Operating employees are
selected based on their willingness to assume responsibility and promote the
Company's philosophy. All marketing, staffing, and management employees are
given numerous incentives to encourage the achievement of corporate goals. The
Company fosters a team-oriented and high energy environment, celebrates the
successes of its employees, and attempts to create a "spirited" work
environment.
GROWTH STRATEGY
The Company's growth strategy is to expand its services in existing markets
where it does not offer its full range of services, and to enter new markets.
The key elements of the Company's growth strategy are as follows:
Introduce Full Services in Markets with Existing Company-Owned
Locations. The Company currently offers its full range of services in seven of
its twelve Company-owned locations. The Company has been implementing a plan to
introduce the Contract Services Division's services into each of the remaining
Company-owned locations. As part of its expansion strategy, the Company recently
introduced Contract Services into the following Company-owned locations: Dallas
(March 1995), Boston (June 1995), Chicago (October 1995), and Philadelphia
(March 1996). The Company introduced Search Division services into Houston in
February 1996. See "Business -- Markets and Organizational Structure."
Open Company-Owned Locations. The Company continually evaluates potential
geographic expansion into new metropolitan areas. To facilitate new market
entry, the Company plans to transfer or recruit experienced personnel for
positions in new Company-owned locations as they are opened. The Company has
opened offices in Dallas (February 1995), Philadelphia (March 1995), Houston
(November 1995), Pittsburgh (February 1996), and Minneapolis (April 1996).
Leverage Existing Client Relationships and Develop New Clients. The
Company continually identifies additional growth opportunities within existing
and new clients as a result of the interrelationships among its three divisions.
The Company has established goals for cross-selling and has trained and
incentivized its operating employees to actively sell the Company's full range
of services, in an effort to maximize its reach into the marketplace.
Introduce New Services. The Company continually evaluates the introduction
of new services in an effort to meet client demands. The Company has recently
introduced contract placement of pharmaceutical, health care, and manufacturing
services personnel to complement its existing search capabilities in these
areas. Additionally, the Company recently acquired an entity that provides
outplacement services and human resource contract and outsourcing services. To
enhance the technical capabilities and perceived quality of the Contract
Services Division, the Company has formed an emerging technologies group in
which selected employees receive extensive training in information technologies
and are assigned to client environments for periods ranging from six months to
two years.
22
<PAGE> 25
Develop Major Accounts Program. The Company will continue to market its
full range of services to existing and new clients in order to position the
Company as the preferred vendor for specialty staffing services. The Company
believes the major accounts program enables it to further penetrate its clients
by giving the Company greater access to key staffing decision makers including
the support of the client's purchasing and procurement team. This increased
access allows the Company to achieve greater operating leverage through improved
efficiencies in the marketing process. The Company has successfully secured
several national agreements for technical and professional specialty staffing
services. The Company intends to aggressively pursue such agreements to
facilitate geographic expansion and existing market penetration.
Acquire Strategic Businesses. The Company will continue to pursue the
acquisition of complementary specialty staffing businesses. The Company's
preference is to acquire businesses in markets in which the Company currently
has a Company-owned location or formerly maintained a franchised or licensed
location, although other markets will also be explored. The Company has as its
primary acquisition candidates local or regional specialty staffing firms with
established client relationships, in markets targeted by the Company.
THE PROFESSIONAL TEMPORARY DIVISION
The Professional Temporary Division provides professional temporary
personnel in the fields of finance and accounting. For the year ended December
31, 1995, and the three months ended March 31, 1996, this division accounted for
approximately 52.5% and 42.4%, respectively, of the Company's net service
revenues. The Company currently offers professional temporary services in eleven
metropolitan markets through Company-owned locations and five other metropolitan
markets through franchised and licensed locations. In the first three months of
1996, the average bill rate for the Professional Temporary Division was
approximately $18 per hour.
The Professional Temporary Division offers its clients a reliable and
cost-effective means of handling uneven or peak workloads caused by events such
as periodic financial reporting deadlines, tax deadlines, special projects,
systems conversions, and unplanned staffing fluctuations. The Professional
Temporary Division meets such clients' needs with personnel who have an
extensive range of accounting and financial experience, including corporate
taxation, budget preparation and analysis, financial reporting, regulatory
filings, payroll preparation, cost analysis, and audit services. Through the use
of the Company's services, clients are able to avoid the cost and inconvenience
of hiring and terminating permanent employees. Typically, the duration of
assignments in the Professional Temporary Division is six to eight weeks.
Candidates for the Professional Temporary Division are obtained from the
Search Division, referrals, and advertising in local newspapers and on the
Company's home page on the World Wide Web. The Company believes it has a
competitive advantage in attracting candidates because of the interaction
between its Professional Temporary and Search Divisions. Access by the
Professional Temporary Division to the Search Division's candidate pool provides
a candidate the opportunity to obtain permanent employment as a result of a
temporary assignment, earnings that may allow a candidate to be more selective
when evaluating permanent opportunities, and additional experience that can
enhance a candidate's skills and overall marketability. Each candidate is
screened by an operating employee with a compatible background to determine his
qualifications and to match these qualifications with individual client needs.
This screening includes an in-depth interview, skill testing, reference checks,
and, in some cases, credit checks and additional background checks.
The Professional Temporary Division targets Fortune 1000 companies and
other large organizations, with a primary focus on organizations determined to
have the potential need for the Company's full range of services. In order to
maximize its marketing effectiveness, the Company provides extensive training to
its employees which emphasizes the consulting nature of its business. The
Company's employees develop marketing plans composed of multiple visits,
frequent telemarketing activity, monthly mailings, and other actions supported
through the use of the PROS and daily staff meetings. The Company believes that
these techniques and processes provide the opportunity to expand its business
within its clients' organizations, solidify client relationships, and develop
new clients. The Company recognizes that in some cases Professional Temporary
Division personnel will be offered permanent positions. If a client requests
that a temporary employee become a permanent employee, the Company typically
charges a "conversion" fee that is calculated as a percentage of the candidate's
initial annual compensation.
23
<PAGE> 26
THE CONTRACT SERVICES DIVISION
The Contract Services Division provides information systems, manufacturing
services, human resources, health care, and pharmaceutical personnel on a
contractual basis, which typically averages six to nine months in duration. For
the year ended December 31, 1995 and the three months ended March 31, 1996, this
division accounted for approximately 26.0% and 37.5%, respectively, of the
Company's net service revenues. In the three months ended March 31, 1996, this
division had an average bill rate of approximately $49 per hour. The Company
currently provides Contract Services in eight metropolitan markets through
Company-owned locations and two additional metropolitan markets through a
franchised location. The Company plans to introduce Contract Services to three
additional Company-owned locations in 1996.
The Contract Services Division has traditionally focused on providing
information systems personnel to assist clients whose needs range from mainframe
environments to single work stations. These consultants perform a wide range of
services, including software development, database design and management, system
administration, end-user training and acceptance, network design and
integration, information strategy development, business and systems plans, and
standardization of technology and business procedures. The size and growth of
the information services industry in recent years have been driven largely by
rapid technological advances. These advances have included the availability of
increased computing power at lower costs and the emergence of new information
systems capabilities. As a result, the ability of companies to benefit from the
application of computer technology has been greatly enhanced and has been
accompanied by a dramatic increase in the number of end users. At the same time,
the sophistication and complexity of the systems needed to serve these companies
and to deliver the desired benefits have greatly increased. Additionally, the
need to contain costs has caused many businesses to reduce the number of
personnel resulting in increased dependence upon information systems to support
important functions and to improve productivity.
The Company's base of skilled technical personnel is integral to its
success. Because technical needs are diverse and technology advances occur
frequently, technical talent is in high demand. As a result, the Contract
Services Division focuses heavily on its recruiting efforts. In addition, the
Company focuses on training its contract services personnel in sophisticated
technology applications. For example, the Company has formed an emerging
technologies group in which selected personnel receive extensive training in
information technologies and are assigned to client environments for periods
ranging from six months to two years. The Company believes that building a base
of skilled technical personnel who are available for assignment is as integral
to its success as are its client relationships.
The March 1996 acquisition of Strategic Outsourcing, Inc. ("SOI"), expanded
the Company's Contract Services capabilities with the introduction of human
resource personnel contracting. SOI, which was formed in 1989 in Boston,
provides its clients human resource personnel on a contractual basis to assist
in the development, implementation, and maintenance of a wide variety of human
resource processes. The Company currently provides human resource contracting
only in the Boston market. The Company intends to introduce this new service
offering into its existing markets.
The Company recently expanded its Contract Services Division in the first
quarter of 1996 to include manufacturing services, health care, and
pharmaceutical personnel. In the field of manufacturing services personnel, the
Contract Services Division provides a wide range of quality engineers and
quality assurance personnel. The Contract Services Division provides all levels
of hospital administration and management with respect to health care. The
Contract Services Division also serves the pharmaceutical industry through
pharmaceutical research and regulatory personnel. Because the Company recently
began serving these fields, there can be no assurance that the Company's
performance in these new areas will be as successful as the Company's
performance has been in information systems.
Company recruiters develop and maintain an active personnel inventory
designed to meet the needs of the Company's clients. To recruit qualified
personnel, the Company uses targeted telephone recruiting, obtains referrals
from its existing personnel and clients, and places newspaper advertisements.
The Search Division's services complement the Contract Services Division's
recruiting efforts, and the Company believes that this combination distinguishes
it from its competitors. To foster loyalty and commitment from its existing
personnel, the Company maintains frequent contact and offers competitive wages,
flexible schedules, and exposure to a variety of working environments.
24
<PAGE> 27
The Contract Services Division concentrates on marketing its services to
Fortune 1000 companies and other businesses with information systems,
manufacturing services, human resources, health care, and pharmaceutical
personnel requirements. Sales personnel emphasize the Companys's ability to
provide contract personnel who can perform a wide range of services within each
of these areas through consultative contacts with client end-users, personal
visits, mailings, and telemarketing efforts.
THE SEARCH DIVISION
The Search Division provides clients with extensive search services for
professional and technical candidates. The professional skills offered by the
Search Division are in the areas of accounting and finance, information
services, financial services, pharmaceutical research, health care, human
resources, insurance, manufacturing services, and sales and marketing. For the
year ended December 31, 1995 and the three months ended March 31, 1996, this
division accounted for approximately 21.5% and 20.1%, respectively, of the
Company's net service revenues. The Company currently offers Search services in
eleven metropolitan markets in which it has Company-owned locations and in five
additional metropolitan markets through franchised or licensed locations.
The Company performs both contingency and retained searches. A contingency
search results in payment to the Company only when a candidate is actually hired
by a client. The Company's strategy is to perform contingency searches only for
skills the Company targets as its "core-business." Client searches that are
outside a core-business area typically are at a management or executive level
and require a targeted research and recruiting effort. The Company typically
performs these searches as retained searches where the client pays a part of the
search fee in advance and the remainder upon completion of the search. The
Company's fee is typically structured as a percentage of the placed candidate's
first-year annual compensation.
Summarized below are the professional disciplines in which the Company has
placed personnel:
ACCOUNTING AND FINANCE
- - Chief Financial Officers
- - Treasurers
- - Controllers
- - Public Accountants
- - Tax Accountants
- - Staff Accountants
- - Cost Accountants
- - Internal Audit Personnel
- - Accounting Managers
- - Financial Analysts
- - Budget Analysts
- - Credit and Collections Personnel
INFORMATION SYSTEMS
- - Chief Information Officers
- - Directors of Systems Development
- - Project Managers
- - Information Engineers
- - System Designers
- - Project Leaders
- - Programmer Analysts
- - Systems Analysts
- - Systems Programmers
- - Office Automation Analysts
- - Telecommunications Analysts
- - Hardware Technicians
- - Application Programmers
- - Software Quality Assurance Personnel
- - Data Administration Personnel
- - Database Support Personnel
- - Computer Operators
- - Software Maintenance Personnel
- - Change Management Personnel
- - Database Architecture Personnel
- - Data Security/Disaster Recovery Personnel
- - Data Communication Architecture
Personnel
- - Network Design and Administration Personnel
- - Data/Voice Communications Personnel
(local and wide-area networks)
- - Client Server Support Personnel
- - Operating System Support Personnel
- - Help Desk Support and Training Personnel
- - Production Control Personnel
25
<PAGE> 28
FINANCIAL SERVICES
- - Large Account Commercial Lenders
- - Portfolio/Relationship Managers
- - Credit Analysts
- - Middle Market Commercial Lenders
- - Real Estate Lenders
PHARMACEUTICAL RESEARCH
- - Clinical Research Personnel
- - Medical Research Personnel
- - Analytical Chemistry Personnel
- - Regulatory Affairs Personnel
- - Medical Communications Personnel
HEALTH CARE
- - Senior Hospital Management
- - Directors and Department Managers
- - Operations Management Personnel
- - Nursing Executives and Managers
- - Risk Management and Quality Assurance Personnel
INSURANCE
- - Field General Managers
- - District Managers
- - Sales Managers
MANUFACTURING SERVICES
- - Quality Engineers
- - Industrial Hygienists
- - Quality Managers and Directors
- - ISO9000 Personnel
- - Quality Assurance Personnel
- - Purchasing and Materials Management Personnel
SALES AND MARKETING
- - Sales Representatives
- - Sales Managers
- - Marketing Managers
- - Applications Managers
- - Business Development Managers
- - Market Coordinators
- - Product Managers
- - Marketing Representatives
HUMAN RESOURCES
- - Health Benefit Personnel
- - Retirement Benefit Personnel
- - Labor Relations Personnel
- - Director Level Personnel
- - Technical Managers
- - Staffing and Generalist Personnel
- - Outplacement Specialists
- - Workers' Compensation Specialists
- - Training and Development Personnel
The Search Division maintains an active database of placement candidates as
the result of its continuous recruiting efforts and reputation in the industry.
In addition, the Search Division consultants locate many potential candidates as
the result of referrals from the Professional Temporary and Contract Services
Divisions.
The Company believes that it has developed a reputation for quality search
work and that it is recognized as a leader in its search specialties. To
minimize the risk of changes in skill demand, the Company's marketing plan
incorporates a continual review of client recruitment plans for future periods
to allow for rapid changes to "in-demand" skills. The quality of the
relationship with client personnel is a key component of the strategy, and the
Company seeks to use consultative relationships to obtain insight into emerging
growth areas. The clients targeted by the Search Division are typically the same
as those targeted by the Professional Temporary and the Contract Services
Divisions. This common focus is intended to contribute to the Company's
objective of providing integrated solutions to its clients' personnel needs.
The Company's search business is highly specialized. Certain skills, such
as accounting and finance and information systems, may be served by local
offices, while other, more highly specialized areas require a
26
<PAGE> 29
regional or national focus. The Company believes that a trend toward greater
selectivity in its clients' hiring processes has contributed to an increased
demand for its search services. This emphasis on quality fits well with the
Company's inventory of personnel. The Company expects that the Search Division
will continue to add specialties in the majority of markets served.
MARKETS AND ORGANIZATIONAL STRUCTURE
The Company serves twelve markets through Company-owned locations and an
additional five markets through franchisees and licensees. Management of the
Company-owned operations is coordinated from its headquarters in Tampa. The
Company's headquarters provides its Company-owned offices with administrative,
marketing, accounting, training, legal, and information systems support,
particularly as it relates to the standardization of the operating processes of
its offices.
The Company operates through a network of Company-owned locations,
franchised locations, and licensed locations. The following table lists the
services offered by the Company on a market by market basis.
<TABLE>
<CAPTION>
SERVICES OFFERED
--------------------------------
PROFESSIONAL CONTRACT YEAR
TEMPORARY SERVICES SEARCH OPENED
------------ -------- ------ --------
<S> <C> <C> <C> <C>
Company-Owned
Atlanta, GA.............................................. X X X 1986
Boston, MA............................................... X X X 1966
Chicago, IL.............................................. X X X 1985
Dallas, TX............................................... X X X 1995
Houston, TX.............................................. X X 1995
Louisville, KY........................................... X X 1992
Miami/Ft. Lauderdale, FL................................. X X X 1982
Minneapolis, MN.......................................... X 1996
Orlando, FL.............................................. X X 1984
Philadelphia, PA......................................... X X X 1995
Pittsburgh, PA........................................... X X 1996
Tampa, FL................................................ X X X 1980
Franchisees/Licensees
New Orleans, LA.......................................... X X X 1987
Portland, ME............................................. X X X 1972
Raleigh, NC.............................................. X X 1986
St. Louis, MO............................................ X X 1990
San Francisco, CA........................................ X X 1989
</TABLE>
ROMAC(R) franchisees pay a royalty in return for use of the ROMAC(R) name
based upon a contractual percentage of the revenue billed by the franchisee.
Licensees enter into a joint marketing and payroll processing arrangement with
the Company. In the case of licensees, the Company collects all accounts on
behalf of the licensee and pays the licensee a percentage of gross profits
generated. The Company does not intend to grant additional franchises or
licenses in the future.
In August 1994, all franchisees and licensees were offered the opportunity
to continue operating under current agreements or to terminate their
relationships with the Company on terms that included the ability to continue in
business in their previously franchised or licensed geographic areas. Because
current franchise and license agreements upon termination invoke non-competition
and non-solicitation provisions and require that certain assets (such as office
telephone numbers, customer lists, and candidate records) be turned over to the
Company, some franchisees and licensees paid termination fees in order to obtain
releases from non-competition and non-solicitation provisions and to retain the
rights to such assets. To date, all but five franchisees or licensees have
agreed to terminate their relationship with the Company.
27
<PAGE> 30
PROFESSIONAL RECRUITERS OPERATING SYSTEM
The Company has developed a proprietary integrated system designed to
maximize productivity and to aid in the management of its business. PROS is
designed to be a comprehensive approach to the operation and management of a
specialty staffing firm. It comprises sophisticated and proprietary operating
and computer systems initially developed in 1982 and continually enhanced. The
system links each Company-owned location through the use of its private network
to the Company's corporate headquarters.
PROS offers several advantages in providing information to support the
goals of the Company. Through the use of PROS, market information concerning
target clients is tracked and prioritized to focus marketing and development
efforts. Readily available management reports indicate the frequency and nature
of contact with the targeted companies to support the marketing plans. By using
these reports, managers provide direction and support to operating personnel to
ensure that priority accounts are properly served. A manager, concerned with the
status of a particular assignment at any point, can examine the detailed status
and degree of coverage on each assignment. PROS offers both detailed and summary
reports to provide a continuous view of key factors related to client service
and development and employee productivity.
In addition to client service considerations, PROS enhances the
productivity and efficiency of the operating employees. One of the primary
problems facing operating employees is the effective and productive use of
information. PROS simplifies the information recording and retrieval problem and
enables operating employees in different divisions and different geographical
areas to share information and communicate more effectively.
Finally, PROS helps the Company manage information by passing data from the
operating divisions software to the accounting software. This approach increases
productivity, as data have a single point of entry and can be readily accessed
by all functional areas within the Company. The Company intends to continue to
enhance its systems capabilities to streamline processes in order to improve
customer servicing.
COMPETITION
The specialty staffing services industry is very competitive and
fragmented. There are relatively limited barriers to entry and new competitors
frequently enter the market. A number of the Company's competitors possess
substantially greater resources than the Company. The Company faces substantial
competition from large national firms and local specialty staffing firms. Large
national firms that offer specialty staffing services include Robert Half
International, Computer Horizons, Inc., and Alternative Resources Corporation.
The local firms are typically operator-owned, and each market generally has one
or more significant competitors. In addition, the Company competes with national
clerical and light industrial staffing firms which also offer specialty
services. These companies include Interim Services, Inc., Norrell Corporation,
AccuStaff Incorporated, and Olsten Corp. In addition, national and regional
accounting firms also offer certain specialty staffing services.
The Company believes that the availability and quality of candidates, the
level of service, the effective monitoring of job performance, scope of
geographic service and the price of service are the principal elements of
competition. The Company believes that availability of quality candidates is an
especially important facet of competition. In order to attract temporary and
contract assignment candidates, the Company places emphasis upon its ability to
provide permanent placement opportunities, competitive compensation, quality and
varied assignments, and scheduling flexibility. Because many temporary and
contract assignment candidates pursue other employment opportunities on a
regular basis, it is important that the Company respond to market conditions
affecting temporary candidates. Additionally, in certain markets the Company has
experienced significant pricing pressure from some of its competitors. Although
the Company believes it competes favorably with respect to these factors, it
expects competition to increase, and there can be no assurance that the Company
will remain competitive.
PROPERTIES
The Company owns no real estate. It leases its corporate headquarters in
Tampa, Florida (see "Certain Transactions"), as well as space for its other
Company-owned locations. The aggregate square footage of office space under
leases for Company-owned locations is approximately 46,000. The leases generally
run for three to
28
<PAGE> 31
five-year terms and the aggregate annual rent paid by the Company in 1995 was
approximately $750,000. The Company believes that its facilities are adequate
for its needs and does not expect difficulty replacing such facilities or
locating additional facilities, if needed.
INSURANCE
The Company maintains a number of insurance policies. Its general liability
policy has aggregate coverage of $2.0 million, with a $1.0 million limit per
occurrence. The Company maintains an automobile liability policy with a combined
single coverage limit of $1.0 million. The Company also carries an excess
liability policy, which covers liabilities that exceed the policy limits of the
above policies, with an aggregate and a per occurrence limit of $2.0 million.
The Company also maintains professional liability and errors and omissions
policies, each with aggregate coverage of $1.0 million, covering certain
liabilities that may arise from the actions or omissions of its temporary or
permanently-placed personnel. The Company currently maintains key man life
insurance on Mr. Dunkel in the amount of $3.0 million. There can be no assurance
that any of the above coverages will be adequate for the Company's needs. See
"Risk Factors -- Employment Liability Risk."
EMPLOYEES
As of March 31, 1996, the Company and its subsidiaries employed
approximately 280 persons. Additionally, as of such date, the Company had
approximately 1,150 individuals on assignment providing professional temporary
or contract services to its clients. As the employer, the Company is responsible
for the regular and temporary payrolls and employer's share of social security
taxes (FICA), federal and state unemployment taxes, workers' compensation
insurance, and other direct labor costs relating to its temporary and contract
personnel (including temporary and contract personnel of its licensees). The
Company offers access to various insurance programs and other benefits for its
temporary and contract personnel. The Company has no collective bargaining
agreements covering any of its employees or personnel, has never experienced any
material labor disruption, and is unaware of any current efforts or plans to
organize its employees or personnel. The Company considers relations with its
employees and personnel to be good.
LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is from time to time
threatened with or named as a defendant in various lawsuits, including
discrimination and harassment and other similar claims. The Company maintains
insurance in such amounts and with such coverages and deductibles as management
believes are reasonable. The principal risks that the Company insures against
are workers' compensation, personal injury, bodily injury, property damage,
professional malpractice, errors and omissions, and fidelity losses. The Company
is not currently involved in any material litigation and is not aware of any
threatened material litigation; however, the Company does have a current dispute
with a computer hardware vendor. The Company believes that the vendor delivered
computer equipment that did not meet promised performance standards. There is no
assurance that the Company will be able to obtain a satisfactory settlement
without instituting litigation or that the vendor will not assert counterclaims
against the Company. The Company does not believe that the results of any
litigation would have a material effect on its financial condition. See "Risk
Factors -- Reliance on Information Processing Systems."
29
<PAGE> 32
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each
person who is currently a director or executive officer of the Company.
<TABLE>
<CAPTION>
DIRECTOR'S
TERM
NAME AGE POSITIONS EXPIRES
- -------------------------------------- --- -------------------------------------- ----------
<S> <C> <C> <C>
David L. Dunkel....................... 42 President, Chief Executive Officer, 1997
and Director
Maureen A. Rorech..................... 35 Vice President and Director 1999
Howard W. Sutter...................... 47 Vice President and Director 1997
Peter Dominici........................ 37 Chief Financial Officer, Secretary, 1998
Treasurer, and Director
Richard M. Cocchiaro.................. 41 Division President and Director 1999
James D. Swartz....................... 43 Vice President --
Gordon Tunstall....................... 52 Director 1998
William R. Carey, Jr.................. 48 Director 1997
</TABLE>
David L. Dunkel has served as President, Chief Executive Officer and a
director of the Company since its formation in August 1994. Prior to August
1994, he served as President and Chief Executive Officer of Romac-FMA, one of
the predecessors of the Company, for 14 years. Mr. Dunkel's prior experience
includes three years service as an accountant with Coopers & Lybrand in Boston.
Maureen A. Rorech has served as Vice President and a director of the
Company since its formation in August 1994. Prior to August 1994, Ms. Rorech
served as Division President of FMA Temporaries, Inc., a subsidiary of
Romac-FMA, with direct responsibility for all of Romac-FMA's professional
temporary operations (1990-1994). Ms. Rorech joined Romac-FMA in 1987 as
director of operations and was promoted to Division President in 1990. Prior to
joining Romac-FMA, she was responsible for the development of the professional
temporary program for the Company's predecessors on a national basis. Ms.
Rorech's previous experience also includes training and operations support for
an 80-office branch network for Career Horizons, Inc., a diversified employment
services firm.
Howard W. Sutter has served as Vice President and a director of the Company
since its formation in August 1994. Prior to August 1994, Mr. Sutter served as
Vice President of Romac-FMA (1984-1994), and Division President of Romac-FMA's
South Florida location (1982-1994). Mr. Sutter's prior experience includes three
years service as Vice President and Controller of a regional airline and six
years service as an accountant with Coopers & Lybrand in Philadelphia.
Peter Dominici has served as Chief Financial Officer, Secretary, Treasurer
and a director of the Company since its formation in August 1994. Prior to
August 1994, he served as Chief Financial Officer and Vice President of
Romac-FMA (1986-1994). Mr. Dominici, a certified public accountant, has had
seven years of prior public accounting experience encompassing extensive audit,
tax, and public company reporting responsibilities.
Richard M. Cocchiaro has served as a Division President of the Company and
a director since its formation in August 1994. He has national financial
services search responsibility. Prior to August 1994, he was a Vice President of
Romac-FMA and Division President of Romac-FMA's Chicago Search Division
(1985-1994) and Romac-FMA's Tampa Search Division (1981-1985). Mr. Cocchiaro's
prior experience includes service as an accountant with Coopers & Lybrand in
Boston.
James D. Swartz has served as Vice President of the Company since February
1996. Prior to joining Romac, he was chief financial officer of Hilton Grand
Vacations Company, a joint venture involving Hilton
30
<PAGE> 33
Hotels Corporation (1994-1996). From 1992-1994 Mr. Swartz was chief financial
officer of the Florida division of Disney Development Company, a wholly-owned
subsidiary of The Walt Disney Corporation. From 1982-1992 Mr. Swartz was chief
financial officer of The Wilson Company, a Tampa real estate developer. Mr.
Swartz served as an accountant with Peat Marwick & Co. in Atlanta (1979-1982).
Gordon Tunstall has served as a director of the Company since October 1995.
He is the founder of and for more than 13 years has served as President of
Tunstall Consulting, Inc., a provider of strategic consulting and financial
planning services. Mr. Tunstall is also currently a director of Discount Auto
Parts, Orthodontic Centers of America and LAT Sportswear.
William R. Carey, Jr. has served as a director of the Company since October
1995. He is currently the Chairman and Chief Executive Officer of Corporate
Resource Development, Inc., an Atlanta, Georgia based sales and marketing
consulting and training firm which began in 1981 and assists some of America's
largest firms in the design, development and implementation of strategic and
tactical product marketing. Mr. Carey serves on the Board of Directors of
Outback Steakhouse, Inc. and is the National Chairman of the Council of Growing
Companies.
COMPOSITION OF THE BOARD OF DIRECTORS
Pursuant to the terms of the Company's articles of incorporation and
bylaws, the Board of Directors has the power to set the number of directors (but
not to more than 12 members) by resolution adopted by the directors of the
Company. The directors are divided into three classes, as nearly equal in number
as possible. Each director in a particular class is elected to serve a
three-year term or until his or her successor is duly elected and qualified. The
classes are staggered so that their terms expire in successive years.
Accordingly, only one class of directors is elected each year and currently the
number of directors is set at seven. The Company intends to maintain at all
times at least two independent directors on its Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Company has established an Audit Committee composed
of Messrs. Dominici, Tunstall, and Carey. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls.
Compensation Committee. The Company has established a Compensation
Committee, consisting of Messrs. Dunkel, Tunstall and Carey. The Compensation
Committee determines the compensation of the Company's executive officers.
Stock Option Committee. Messrs. Dunkel and Sutter are the members of the
Company's Stock Option Committee and are ineligible to receive discretionary
grants of stock, stock options or stock appreciation rights, under any plan of
the Company during the time they serve on the Committee. The Stock Option
Committee administers the Company's Incentive Stock Option Plan, and makes all
determinations as to grants of options. See "Management -- Incentive Stock
Option Plan."
Other Committees. The Board of Directors may establish other committees as
deemed necessary or appropriate from time to time, including, but not limited
to, an Executive Committee of the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid $5,000 annually
plus $500 for each board meeting attended, and $500 for each committee meeting
attended if such meetings occur on a day other than a scheduled meeting of the
Board of Directors. In addition, the Company reserved 200,000 shares of Common
Stock for future issuance upon the exercise of stock options that may be granted
to such non-employee directors. During 1995, Messrs. Tunstall and Carey were
each granted ten-year options to purchase 20,000
31
<PAGE> 34
shares of the Company's common stock at an exercise price of $9.375 per share.
These options vest 50% per year beginning one year from the option grant date.
All directors receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with meetings of the Board of Directors. No director who
is an employee of the Company receives separate compensation for services
rendered as a director.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information with respect to all
compensation paid or earned for services rendered to the Company in all
capacities in 1994 and 1995 by the Company's President and Chief Executive
Officer and the four other executive officers of the Company whose total annual
salary and bonus for the fiscal year ending December 31, 1995, exceeded $100,000
(collectively the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
-------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS
- -------------------------------------------------- ----- --------- -------- ---------------------
<S> <C> <C> <C> <C>
David L. Dunkel................................... 1995 $ 200,000 -- --
President, Chief Executive Officer, and Director 1994 150,000 $443,111 --
Maureen A. Rorech................................. 1995 150,000 -- 135,252
Vice President and Director 1994 60,000 266,500 --
Howard W. Sutter.................................. 1995 150,000 -- --
Vice President and Director 1994 90,000 183,660 --
Peter Dominici.................................... 1995 100,000 -- 20,000
Chief Financial Officer, Secretary, Treasurer 1994 75,000 105,000 154,612
and Director
Richard M. Cocchiaro.............................. 1995 75,000 -- --
Division President and Director 1994 90,000 120,454 --
</TABLE>
- ---------------
(1) Includes deferred compensation.
(2) Includes the Company's matching contribution under the deferred compensation
plan. See Note 9 of Notes to the Company's Consolidated Financial
Statements. The bonuses awarded in 1994 are not necessarily indicative of
future bonus awards pursuant to the new management employment agreements.
See "Management -- Employment Agreements."
32
<PAGE> 35
OPTION GRANTS IN 1995
The following table shows information concerning stock options granted
during 1995 to the Named Executive Officers. The exercise price of these stock
options was determined to be the fair market value of the Common Stock on the
date of grant, based upon an independent appraisal or by the closing price of
the Common Stock on the Nasdaq National Market. Stock appreciation rights have
not been granted in connection with any such stock options.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION -------------------
NAME GRANTED(#) IN FISCAL YEAR PER SHARE DATE 5% 10%
- ----------------------------- ---------- -------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David L. Dunkel.............. -- -- -- -- -- --
Maureen A. Rorech............ 115,252 13.9% $ 2.98 01/03/05 $215,994 $547,372
20,000 2.4% 8.375 10/04/06 105,340 266,952
Howard W. Sutter............. -- -- -- -- -- --
Peter Dominici............... 20,000 2.4% 8.375 10/04/06 105,340 266,952
Richard M. Cocchiaro......... -- -- -- -- -- --
</TABLE>
AGGREGATE OPTION EXERCISES IN 1995 AND DECEMBER 31, 1995 OPTION VALUES
The following table shows information concerning options exercised during
1995 and options held by the Named Executive Officers at the end of 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS VALUE OF IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END(1)
----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David L. Dunkel............................ -- -- -- --
Maureen A. Rorech.......................... 33,540 101,412 $ 294,146 $ 784,114
Howard W. Sutter........................... -- -- -- --
Peter Dominici............................. 36,600 138,012 330,132 1,131,968
Richard M. Cocchiaro....................... -- -- -- --
</TABLE>
- ---------------
(1) Represents the dollar value of the difference between the value at December
31, 1995 and the option exercise price.
INCENTIVE STOCK OPTION PLAN
The Company's Incentive Stock Option Plan (the "Option Plan") provides for
the grant to employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Option
Plan is intended to provide incentives to key employees and to enhance the
Company's ability to attract and retain qualified employees. The Option Plan
originally was adopted by the Board of Directors and shareholders of the Company
in September 1994. A total of 3,000,000 shares of Common Stock has been reserved
for issuance under the Option Plan. Between September 19, 1994 and April 1,
1996, the Company's Stock Option Committee granted stock options covering a
total of 1,220,748 shares of Common Stock (net of forfeitures) to various
employees (including options to purchase 369,864 shares issued to certain
directors and executive officers) at exercise prices ranging from $2.73 per
share to $15.375 per share.
The duration of options granted under the Option Plan is ten years from the
date of grant, or such shorter period as determined by the Stock Option
Committee. The options are non-transferable other than by will or by the laws of
descent and distribution.
33
<PAGE> 36
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with David L. Dunkel,
Maureen A. Rorech, Howard W. Sutter, and Peter Dominici effective January 1,
1995. Each of these agreements is for a period of two years and provides for an
annual base salary and certain other benefits. The annual base salaries for
fiscal 1996 for Mr. Dunkel, Ms. Rorech, Mr. Sutter, and Mr. Dominici are
$200,000, $150,000, $150,000, and $110,000, respectively. The employment
agreements prohibit these executives from participating in the Company's bonus
incentive pool during the term of the agreements. The employment agreements also
provide that the executives are entitled to severance benefits if their
employment is terminated by the Company "without cause" (as defined in the
employment agreements). In such a case, the executive would receive his or her
full compensation for a period of two years. The employment agreements also
provide that upon a change in control of the Company each executive would be
entitled to receive an immediate lump sum payment equal to twice the executive's
annual salary, subject to certain limitations. In general, a change in control
is defined by the employment agreements to be any replacement of 50% or more of
the directors of the Company that follows and is directly or indirectly the
result of certain extraordinary corporate occurrences, such as a merger or other
business combination involving the Company, a tender offer for the Company's
stock, a solicitation of proxies other than by the Company's management or Board
of Directors, or an acquisition by a person or group of 25% or more of the
Company's stock. Each agreement contains a covenant not to compete, which
continues for one year following any termination.
SPLIT DOLLAR ARRANGEMENTS
In 1995, the Company entered into split dollar and cross-purchase split
dollar life insurance agreements with Messrs. Dunkel, Sutter and Cocchiaro and
Ms. Rorech and their estates whereby the Company pays part of the life insurance
premiums on behalf of the officers and their estates. The Company has been
granted a security interest in the cash value and death benefit of each policy
equal to the amount of the cumulative premium payments made by the Company. The
intent of these agreements is to provide liquidity, in the event of an executive
officer's or director's death, to pay estate taxes and to provide surviving
executive officers and directors with the ability to purchase shares from a
deceased executive officer's or director's estate, and to minimize the
possibility of a large block of the Company's common shares being put on the
open market to the potential detriment of the Company's market price. The total
premiums paid during 1995 were approximately $381,000 and are included in the
Company's financial statements as related party receivables at December 31,
1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board's Compensation Committee currently consists of Messrs. Dunkel,
Tunstall and Carey. Messrs. Tunstall and Carey are not employees of the Company.
Set forth below is a description of certain transactions and relationship
between the Compensation Committee members, the Chief Executive Officer and the
Company.
In October 1995, the Company entered into a strategic consulting agreement
with Corporate Resource Development, Inc., a company affiliated with William R.
Carey, Jr., a director of the Company. Services under this agreement are to be
completed by December 1996 at a cost of approximately $200,000.
CERTAIN TRANSACTIONS
The Company leases office space and parking facilities from a limited
partnership in which David L. Dunkel, Howard W. Sutter, and Richard M.
Cocchiaro, officers and directors of the Company, are limited partners. Payments
under the lease are approximately $24,000 per month, expiring in 2001. Total
lease payments to the partnership were approximately $164,000, $165,000, and
$266,000 in 1993, 1994, and 1995, respectively. The Company believes the lease
payments are comparable to those that would be made to an unrelated third party.
34
<PAGE> 37
David L. Dunkel, Maureen A. Rorech, Howard W. Sutter and Richard M.
Cocchiaro, directors and executive officers of the Company, received 2,354,592,
416,754, 1,106,658 and 988,928 shares of Common Stock, respectively, in exchange
for shares of Romac-FMA and its affiliates, pursuant to the combination of a
number of entities in connection with the 1994 Combination. These individuals
received shares of the Company at the same exchange rate as did all of the other
shareholders of the entities involved in the Combination.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1996 by: (i) each of the
Company's directors and Named Executive Officers; (ii) all executive officers
and directors of the Company as a group; and (iii) each person known by the
Company to own beneficially more than 5% of the Common Stock. Each of the
holders listed below has sole voting power and investment power over the shares
beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO THE OWNED
OFFERING SHARES AFTER THE OFFERING
------------------- OFFERED -------------------
NAME NUMBER PERCENT FOR SALE NUMBER PERCENT
- ------------------------------------------------- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
David L. Dunkel(1)............................. 2,354,592 24.4% 312,096 2,042,496 18.1%
Maureen A. Rorech(1)(2)........................ 502,294 5.2% 200,000 302,294 2.7%
Howard W. Sutter(3)............................ 1,106,658 11.5% 220,000 886,658 7.9%
Peter Dominici(4).............................. 73,200 * -- 73,200 *
Richard M. Cocchiaro(5)........................ 996,528 10.3% 200,000 796,528 7.1%
James D. Swartz(6)............................. 16,000 * -- 16,000 *
Gordon Tunstall(7)............................. -- -- -- -- --
William R. Carey, Jr.(8)....................... -- -- -- -- --
All Directors and Executive Officers as a Group
(8 persons)................................. 5,049,272 51.5% 932,096 4,117,176 36.1%
SELLING SHAREHOLDERS
Ralph E. Struzziero............................ 171,904 1.8% 71,904 100,000 *
James E. Tonra................................. 87,552 * 26,000 61,552 *
</TABLE>
- ---------------
* Less than 1%.
(1) The business address for Mr. Dunkel and Ms. Rorech is 120 West Hyde Park
Place, Suite 200, Tampa, Florida 33606.
(2) Ms. Rorech has two ten-year options to purchase a total of 135,252 shares of
Common Stock, 115,252 of which are exercisable at a price of $2.98 per
share, and 20,000 of which are exercisable at a price of $8.375 per share.
The number of shares shown in the table above includes 67,080 shares that
are subject to options that are currently exercisable.
(3) The business address for Mr. Sutter is 500 West Cypress Creek, Suite 200,
Ft. Lauderdale, Florida 33309.
(4) Mr. Dominici has two ten-year options to purchase a total of 174,612 shares
of Common Stock, 154,612 of which are exercisable at a price of $2.73 per
share, and 20,000 of which are exercisable at a price of $8.375 per share.
The number of shares in the table above represents the number of shares
subject to options that are currently exercisable.
(5) The business address for Mr. Cocchiaro is 20 North Wacker Drive, Suite 1645,
Chicago, Illinois 60606.
(6) Mr. Swartz has a ten-year option to purchase a total of 60,000 shares of
Common Stock which are exercisable at a price of $12.50 per share. The
number of shares shown in the table above includes 8,000 shares that are
subject to options that are currently exercisable.
(7) Mr. Tunstall has a ten-year option to purchase a total of 20,000 shares of
Common Stock at an exercise price of $9.375 per share.
(8) Mr. Carey has a ten-year option to purchase a total of 20,000 shares of
Common Stock at an exercise price of $9.375 per share.
35
<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 15,000,000 shares of
Common Stock having a par value of $.01 per share and 15,000,000 shares of
preferred stock having a par value of $.01 per share. As of April 30, 1996,
9,654,782 shares of Common Stock and no shares of preferred stock are issued and
outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held.
Shareholders do not have the right to cumulate their votes in elections of
directors. Accordingly, holders of a majority of the issued and outstanding
Common Stock will have the right to elect all the Company's directors and
otherwise control the affairs of the Company.
Holders of Common Stock are entitled to dividends on a pro rata basis upon
declaration of dividends by the Board of Directors. Dividends are payable only
out of unreserved and unrestricted surplus that is legally available for the
payment of dividends. The Board of Directors is not required to declare
dividends, and it currently expects to retain any funds generated from
operations to finance the development of the Company's business. The payment of
dividends in the future will depend upon earnings, capital needs, and other
factors. See "Dividend Policy."
Upon a liquidation of the Company, holders of the Common Stock will be
entitled to a pro rata distribution of the assets of the Company, after payment
of all amounts owed to the Company's creditors, and subject to any preferential
amount payable to holders of preferred stock of the Company, if any.
PREFERRED STOCK
The Company's articles of incorporation permit the Company's Board of
Directors to issue shares of preferred stock in one or more series, and to fix
the relative rights, preferences, and limitations of each series. Among such
rights, preferences, and limitations are dividend rights and rates, provisions
for redemption, rights upon liquidation, conversion privileges, and voting
powers. The Board of Directors of the Company currently has no plans to issue
any shares of preferred stock. See "Risk Factors -- Availability of Preferred
Stock for Issuance."
The purpose for authorizing the Board of Directors to issue preferred stock
is, in part, to eliminate delays associated with a shareholder vote in specific
instances. The issuance of preferred stock, for example in connection with a
shareholder rights plan, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding existing stock of the Company.
REGISTRATION RIGHTS
Pursuant to two registration rights agreements, certain shareholders
holding a total of 4,907,158 shares of Common Stock may require the Company to
use its best efforts to effect the registration of all or part of the shares
currently held by such shareholder, subject to certain terms and conditions. In
addition, if the Company proposes to register any shares of its Common Stock
under the Securities Act in the future, these shareholders will be entitled to
include their shares in the registration, subject to certain conditions and
limitations. The Company will be required to bear all the expenses of such
registration except for underwriting discounts and selling commissions. In
addition, fees and expenses of counsel for a particular selling shareholder
shall be borne by such shareholder.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
The Company's articles of incorporation provide for a classified Board of
Directors. The directors are divided into three classes, as nearly equal in
number as possible. The directors are elected for three-year terms,
36
<PAGE> 39
which are staggered so that the terms of one-third of the directors expire each
year. The articles of incorporation permit removal of directors only for cause
by the shareholders of the Company at a meeting by the affirmative vote of at
least two-thirds of the outstanding shares of Common Stock. The articles of
incorporation establish an advance notice procedure for the nomination of
candidates for election as directors, as well as for other shareholder proposals
to be considered at shareholders' meetings.
The articles of incorporation also contain a "fair price" provision, which
is intended to ensure that the consideration paid by an acquiror in certain
transactions involving the Company that follow a successful tender offer must be
no less than the highest consideration offered pursuant to the tender offer.
Among other things, such transactions must be approved by (i) the holders of at
least 80% of the outstanding Common Stock, and (ii) the holders of a majority of
the outstanding Common Stock other than the interested shareholder.
The above-described provisions may have certain anti-takeover effects. Such
provisions, in addition to the provisions described below and the possible
issuance of preferred stock discussed above, may make it more difficult for
other persons, without the approval of the Company's Board of Directors, to make
a tender offer or acquisitions of substantial amounts of the Common Stock or to
launch other takeover attempts that a shareholder might consider in such
shareholder's best interests, including attempts that might result in the
payment of a premium over the market price for the Common Stock held by such
shareholder.
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law, unless the
corporation has elected to opt out of those provisions in its articles of
incorporation or bylaws. The Company has not elected to opt out of those
provisions. The Florida Business Corporation Act (the "FBCA") prohibits the
voting of shares in a publicly-held Florida corporation that are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors, or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
"control share acquisition" is defined as an acquisition that immediately
thereafter entitles the acquiring party to vote in the election of directors
within each of the following ranges of voting power: (i) one-fifth or more but
less than one-third of such voting power, (ii) one-third or more but less than a
majority of such voting power, and (iii) more than a majority of such voting
power.
The FBCA also contains an "affiliated transaction" provision that prohibits
a publicly-held Florida corporation from engaging in a broad range of business
combinations or other extraordinary corporate transactions with an "interested
shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder,
(ii) the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the transaction is
approved by the holders of two-thirds of the corporation's voting shares other
than those owned by the interested shareholder. An interested shareholder is
defined as a person who together with affiliates and associates beneficially
owns more than 10% of the corporation's outstanding voting shares.
SHARES ELIGIBLE FOR FUTURE SALE
After completion of the Offering, the Company will have 11,264,782 shares
of Common Stock outstanding (11,660,782 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, 6,357,624
(6,753,624 shares if the Underwriters' over-allotment option is exercised in
full), will be freely tradeable without restriction or further registration
under the Securities Act. The remaining 4,907,158 shares outstanding are
"Restricted Securities" as that term is defined in Rule 144 of the Securities
Act. The holding period imposed upon these shares by Rule 144 began to run in
August 1994. Accordingly, none of these shares may be sold pursuant to Rule 144
prior to August 1996.
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance with
the Rule) who has beneficially owned Restricted Securities for at least two
years would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1% of the outstanding shares of Common Stock
(approximately 112,650 shares based upon the number of shares outstanding after
the Offering) or the reported average weekly trading volume in the
over-the-counter market for the four weeks preceding the sale. Sales under Rule
144 are also subject to certain manner of sale restrictions and notice
requirements and to the availability of current public information
37
<PAGE> 40
concerning the Company. Persons who have not been affiliates of the Company for
at least three months and who have held their shares for more than three years
are entitled to sell Restricted Securities without regard to the volume, manner
of sale, notice and public information requirements of Rule 144.
As of April 30, 1996, stock options to purchase an aggregate of 1,222,970
shares of Common Stock were outstanding under the Company's incentive stock
option plan and its non-employee director plan. In addition, as of such date,
1,958,141 shares were available for future stock option grants under these
plans. Shares of Common Stock issued upon exercise of options are eligible for
resale in the public market without restriction unless such shares are held by
affiliates. See "Management -- Incentive Stock Option Plan" and
"Management -- Director Compensation."
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholders have agreed to sell to each
of the underwriters named below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase from the Company the respective
number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS COMMON SHARES
---------------------------------------------------------------------- -------------
<S> <C>
Robert W. Baird & Co. Incorporated....................................
Prudential Securities Incorporated....................................
-------------
Total....................................................... 2,640,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 2,640,000 shares of
Common Stock offered hereby if any such Common Stock are purchased. In the event
of a default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, purchase commitments of the non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
The Company and the Selling Shareholders have been advised by the
Underwriters that the several Underwriters propose to offer such Common Stock to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may re-allow a
concession not in excess of $ per share to other dealers. After the shares
of Common Stock are released for sale to the public, the offering price and
other selling terms may be changed by the Underwriters.
The Company has granted the Underwriters an option, expiring 30 days from
the date of this Prospectus, to purchase up to 396,000 additional shares of
Common Stock at the public offering price less underwriting discounts and
commissions set forth on the cover page of this Prospectus. The Underwriters may
exercise such option solely to cover over-allotments, if any, made in connection
with the sale of the Common Stock that the Underwriters have agreed to purchase.
To the extent the Underwriters exercise such option, each of the Underwriters
will have a firm commitment, subject to certain conditions, to purchase a number
of option shares proportionate to such Underwriter's initial commitment.
The Company, its officers and directors, and the Selling Shareholders have
agreed that, except with the prior written consent of Robert W. Baird & Co.
Incorporated, during the 90 days following the date of this Prospectus they will
not offer for sale, sell, grant any options, right or warrants with respect to
any shares of Common Stock or any other Company capital stock, securities or
instruments convertible into or exchangea-
38
<PAGE> 41
ble for Common Stock or other Company capital stock, securities or instruments
convertible into or exchangeable for common stock of other company capital
stock, or otherwise dispose of, or reduce any risk of ownership, directly or
indirectly, of any shares of Common Stock, such other capital stock or any other
securities, instruments, options or rights convertible into or exchangeable for,
or otherwise exercisable for Common Stock or other Company capital stock, except
for the Common Stock offered hereby. Notwithstanding the foregoing, the Company
may (i) grant options pursuant to the Company's stock option plans in the
ordinary course consistent with past practice and issue shares of Common Stock
upon the exercise of any such options or under options currently outstanding,
(ii) issue shares of Common Stock or other securities convertible into Common
Stock or any other capital stock of any company solely to owners of capital
stock of any company acquired by the Company subsequent to the date 45 days from
the date of this Prospectus. Any permitted shortening of such periods and any
related sales of Common Stock would not necessarily be preceded by a public
announcement of the Company or the Representatives that such consent has been
given.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities under
the Securities Act of 1933 or contribute to payments the Underwriters may be
required to make in respect thereof.
In connection with this offering, certain Underwriters and selling group
members who in the past have acted as market makers in the Common Stock may
engage in passive market making activities in the Common Stock on the Nasdaq
National Market in accordance with Rule 10b-6A under the Exchange Act.
Underwriters and other participants in the distribution of the Common Stock
generally are prohibited during a specified time period (the "qualifying
period") determined in light of the timing of the distribution, from bidding for
or purchasing the Common Stock or a related security except to the extent
permitted under applicable rules, primarily Rules 10b-6 and 10b-6A. Rule 10b-6A
allows, among other things, an Underwriter or member of the selling group for
the Common Stock to effect "passive market making" transactions on the Nasdaq
National Market in the Common Stock during the qualifying period at a price that
does not exceed the highest independent bid for that security at the time of the
transaction. Such a passive market maker must not display a bid for the subject
security at a price in excess of the highest independent bid, and generally must
lower its bid if all independent bids are lowered. Moreover, the passive market
maker's net purchases of such security on each day of the qualifying period
shall not exceed 30% of its average daily trading volume during a reference
period preceding the distribution.
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for the Company by Holland & Knight,
Tampa, Florida (a partnership including professional corporations), and for the
Underwriters by Foley & Lardner, Milwaukee, Wisconsin.
EXPERTS
The Consolidated Financial Statements of Romac International, Inc. as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, and the Financial Statements of Venture Networks Corporation,
Inc. as of and for the year ended December 31, 1995 included in this Prospectus
have been so included in reliance on the reports of Price Waterhouse LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
The Financial Statements of PCS Group, Inc. as of and for the year ended
December 31, 1995 included in this Prospectus have been so included in reliance
on the report of Deming, Malone, Livesay & Ostroff, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
The Financial Statements of Strategic Outsourcing, Inc. as of December 31,
1995 and 1994 and for each of the two years in the period ended December 31,
1995 included in this Prospectus, have been so included in reliance on the
report of Robert J. Dennehy, independent certified public accountant, given on
the authority of said firm as experts in auditing and accounting.
39
<PAGE> 42
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and related exhibits and
schedules for further information with respect to the Company and the Common
Stock offered hereby. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and in each such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits and schedules forming a
part thereof can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should also be available for inspection and copying at the
following regional offices of the Commission: 7 World Trade Center, Suite 1300,
New York, New York 10048; and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Commission. such reports and other information (including
proxy and information statements) filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of each material may be obtained from the
public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 25049, at prescribed rates.
40
<PAGE> 43
ROMAC INTERNATIONAL, INC.
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<S> <C>
Introduction to Unaudited Pro Forma Consolidated Financial Information................ P-2
Unaudited Pro Forma Consolidated Statements of Operations for the year ended December
31, 1995 and the three months ended March 31, 1996.................................. P-3
Notes to Unaudited Pro Forma Consolidated Statements of Operations.................... P-5
</TABLE>
P-1
<PAGE> 44
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
The following unaudited pro forma consolidated information for the year
ended December 31, 1995 and the three months ended March 31, 1996 have been
prepared to reflect the financial position of Romac International, Inc. (the
"Company") as if the acquisitions of Venture Networks Corporation, Inc.
("Venture Networks") in January 1996, PCS Group, Inc. ("PCS") in February 1996,
and Strategic Outsourcing, Inc. ("Strategic Outsourcing") in March 1996, had
occurred effective January 1, 1995. As all three acquisitions occurred prior to
March 31, 1996, the pro forma consolidated balance sheet as of March 31, 1996 is
not required.
VENTURE NETWORKS ACQUISITION
The acquisition was treated as a purchase for financial reporting purposes.
The Company acquired Venture Networks for $1.1 million in cash and is subject to
an earn-out agreement wherein all earnings before income taxes of Venture
Networks in excess of $325,000 for the years ending December 31, 1996, 1997 and
1998, shall be paid to Venture Networks' prior owners in the form of additional
purchase price. The transaction was financed by the proceeds of the Company's
initial public offering which had been invested in short-term securities since
August 1995.
PCS ACQUISITION
The acquisition was treated as a purchase for financial reporting purposes.
The Company acquired PCS for approximately $2.3 million in cash and is subject
to an earn-out agreement wherein two times all earnings before income taxes of
PCS in excess of $500,000, for the years ending December 31, 1996, 1997 and
1998, shall be paid to PCS's prior owners in the form of additional purchase
price, to a cumulative maximum dollar amount of $1.2 million. The transaction
was financed by the proceeds of the Company's initial public offering which had
been invested in short-term securities since August 1995.
STRATEGIC OUTSOURCING ACQUISITION
The acquisition was treated as a purchase for financial reporting purposes.
The Company acquired Strategic Outsourcing for approximately $2.5 million in
cash and is subject to an earn-out agreement wherein two times all earnings
before income taxes of Strategic Outsourcing in excess of $500,000 and 50% of
any earnings before income taxes greater than $1.0 million for the years ending
December 31, 1996, 1997, and 1998, shall be paid to Strategic Outsourcing's
prior owners in the form of additional purchase price. The agreement also calls
for a minimum payout of $500,000, $600,000, and $600,000 for fiscal years 1996,
1997 and 1998 if Strategic Outsourcing's earnings before income taxes exceed
$625,000, $750,000, and $750,000, respectively. The transaction was financed by
the proceeds of the Company's initial public offering which had been invested in
short-term securities since August 1995.
------------------------
The unaudited pro forma consolidated financial statements are derived, in
part, from historical financial
statements and should be read in conjunction with those financial statements and
the notes thereto. The unaudited pro forma consolidated financial statements are
not necessarily indicative of the results that would have occurred if the
assumed transaction had occurred on the dates indicated or the expected
financial position or results of operations in the future. The unaudited pro
forma consolidated statement of income should be read in conjunction with the
separate historical financial statements of Romac International, Inc. listed in
the Index on Page F-1 and in conjunction with the related assumptions and notes
to these unaudited pro forma consolidated financial statements. The historical
earnings per share amounts have been adjusted to reflect the two for one stock
split effected as a 100% stock dividend effective May 15, 1996.
P-2
<PAGE> 45
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------
ROMAC VENTURE PCS STRATEGIC PRO FORMA
INTERNATIONAL NETWORKS GROUP OUTSOURCING ADJUSTMENTS PRO FORMA
------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net service
revenues............ $ 45,654,862 $2,112,322 $3,583,233 $ 7,134,637 $58,485,054
Direct Cost of
Services............ 25,460,019 753,031 2,355,382 3,538,338 32,106,770
------------- ---------- ---------- ----------- -----------
Gross
Profit.............. 20,194,843 1,359,291 1,227,851 3,596,299 26,378,284
Selling, general and
administrative
expenses............ 15,231,842 1,170,532 868,095 3,115,000 $(500,000)(a) 19,885,469
Depreciation and
amortization
expense............. 511,961 9,130 13,334 67,213 423,600(b) 1,025,238
Other (income)
expenses:
Dividend and
interest
(income)......... (213,936) 201,300(c) (12,636)
Interest expense.... 133,033 3,240 2,251 1,696 140,220
Other (income)
expense, net..... (489,350) (2,298) (3,603) (495,251)
------------- ---------- ---------- ----------- ----------- -----------
Income
before
income
taxes..... 5,021,293 176,389 346,469 415,993 (124,900) 5,835,244
Provision for income
taxes............... 2,008,497 -- -- 7,000 318,600(d) 2,334,097
------------- ---------- ---------- ----------- ----------- -----------
Net
income.... $ 3,012,796 $ 176,389 $ 346,469 $ 408,993 $(443,500) $ 3,501,147
========== ========= ========= ========= ========= ==========
Net income per
share(f)............ $ 0.41
==========
Weighted average
shares
outstanding(f)...... 8,487,854
</TABLE>
See Notes to the Unaudited Pro Forma Consolidated Statements of Income.
P-3
<PAGE> 46
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------
ROMAC VENTURE PCS STRATEGIC PRO FORMA
INTERNATIONAL NETWORKS(E) GROUP(E) OUTSOURCING(E) ADJUSTMENTS PRO FORMA
------------- ----------- -------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net service revenues..... $ 16,889,273 $296,830 $1,200,976 $18,387,079
Direct Cost of
Services............... 9,718,793 216,855 670,892 10,606,540
------------- ----------- -------- -------------- ----------- -----------
Gross Profit........ 7,170,480 79,975 530,084 7,780,539
Selling, general and
administrative
expenses............... 5,372,375 54,402 486,779 $ (66,667)(a) 5,846,889
Depreciation and
amortization expense... 236,764 1,026 44,892(b) 282,682
Other (income) expense,
net.................... (147,439) (1,469) (148,908)
------------- ----------- -------- -------------- ----------- -----------
Income before income
taxes............. 1,708,780 24,547 44,774 21,775 1,799,876
Provision for income
taxes.................. 683,512 23,925(d) 707,437
------------- ----------- -------- -------------- ----------- -----------
Net income.......... $ 1,025,268 $ 24,547 $ 44,774 $ (2,150) $ 1,092,439
========== ========= ======== =========== ========= ==========
Net income per
share(f)............... $ .11
==========
Weighted average shares
outstanding(f)......... 10,338,208
</TABLE>
See Notes to the Unaudited Pro Forma Consolidated Statements of Income
P-4
<PAGE> 47
ROMAC INTERNATIONAL, INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
Basis of Recording the Transactions. The accompanying pro forma
consolidated income statements for the year ended December 31, 1995 and the
three months ended March 31, 1996 have been prepared to reflect the operations
of the Company as if the following had occurred on January 1, 1995: (i) the
acquisition of Venture Networks Corporation, Inc.; (ii) the acquisition of PCS
Group, Inc.; and (iii) the acquisition of Strategic Outsourcing, Inc.
Statements of Income Adjustments. The following pro forma adjustments were
made to the historical statements of the Company.
(a) This adjustment relates to non-recurring selling, general and
administrative expenses primarily due to eliminated employee salaries and
related benefits of $330,000; third party accounts receivable processing fees of
approximately $101,000; legal fees related to a liability not assumed in the
acquisition of $30,000; rent expense of $20,000; and related party expenses of
$19,000.
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Venture Networks............................. $ -- $ --
PCS.......................................... (200,000) (16,667)
Strategic Outsourcing........................ (300,000) (50,000)
----------------- ------------------
Total.............................. $(500,000) $(66,667)
================= ==================
</TABLE>
(b) This adjustment reflects the increase in amortization expense related
to the goodwill and other intangible assets recorded under the purchase method
of accounting for the following acquisitions:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Venture Networks............................. $ 84,900 $ --
PCS.......................................... 181,400 15,117
Strategic Outsourcing........................ 157,300 29,775
----------------- ------------------
Total.............................. $423,600 $44,892
================= ==================
</TABLE>
(c) This adjustment reflects the decrease in dividend and interest income
as investments were used to finance the acquisitions. The weighted average
interest rate for 1995 for the Company was 5.95%.
(d) This adjustment reflects the increase to income tax expense based on
the pro forma adjustments to income before provision for income taxes and as if
Venture Networks, PCS and Strategic Outsourcing were taxable as C corporations
based on the Company's effective tax rate of approximately 40%.
(e) Represents operations prior to effective date of acquisition.
(f) As adjusted for a two for one stock split in the form of a 100% stock
dividend effective May 15, 1996.
P-5
<PAGE> 48
ROMAC INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ROMAC INTERNATIONAL, INC.
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31, 1996.......... F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and for the three months ended March 31, 1995 and 1996......................... F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and for the three months ended March 31, 1996...... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and for the three months ended March 31, 1995 and 1996......................... F-6
Notes to Consolidated Financial Statements............................................ F-7
VENTURE NETWORKS CORPORATION, INC.
Report of Independent Certified Public Accountants.................................... F-19
Balance Sheet as of December 31, 1995................................................. F-20
Statement of Operations and Retained Earnings for the year ended December 31, 1995.... F-21
Statement of Cash Flows for the year ended December 31, 1995.......................... F-22
Notes to Financial Statements......................................................... F-23
PCS GROUP, INC.
Independent Auditors' Report.......................................................... F-26
Balance Sheet as of December 31, 1995................................................. F-27
Statement of Income and Retained Earnings for the year ended December 31, 1995........ F-28
Statement of Cash Flows for the year ended December 31, 1995.......................... F-29
Notes to Financial Statements......................................................... F-30
STRATEGIC OUTSOURCING, INC.
Report of Independent Certified Public Accountant..................................... F-33
Balance Sheets as of December 31, 1995 and 1994....................................... F-34
Statements of Operations and Retained Earnings for the two years ended
December 31, 1995 and 1994.......................................................... F-35
Statements of Cash Flows for the two years ended December 31, 1995 and 1994........... F-36
Notes to Financial Statements......................................................... F-37
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Romac International, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and changes in shareholders'
equity and of cash flows present fairly, in all material respects, the financial
position of Romac International, Inc., and its subsidiaries ("the Company") at
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Tampa, Florida
February 15, 1996
F-2
<PAGE> 50
ROMAC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, THREE
------------------------ MONTHS ENDED
1994 1995 MARCH 31,
---------- ----------- 1996
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 705,144 $ 619,766 $ 589,430
Short-term investments.......................................... 247,922 7,903,559 660,203
Trade receivables, net of allowance for doubtful accounts of
$332,900, $623,150 and $532,526, respectively................. 3,220,335 7,353,790 10,477,649
Notes receivable from franchisees, current (Note 8)............. 96,674 136,464 202,195
Receivables from related parties, current (Note 7).............. 180,965 186,219 71,985
Deferred tax asset (Note 6)..................................... 174,382 308,374 308,374
Prepaid expenses and other current assets (Note 9).............. 718,123 321,276 773,930
---------- ----------- ------------
Total current assets..................................... 5,343,545 16,829,448 13,083,766
Notes receivable from franchisees, less current portion (Note
8).............................................................. 43,468 20,000 20,000
Receivables from related parties, less current portion (Note 7)... 149,136 486,513 516,861
Deferred tax asset (Note 6)....................................... 188,661 118,505 118,505
Furniture and equipment, net (Note 3)............................. 314,531 2,405,284 2,583,080
Other assets, net (Notes 4 and 9)................................. 944,426 1,091,944 6,846,090
---------- ----------- ------------
Total assets............................................. $6,983,767 $20,951,694 $23,168,302
========== ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued liabilities (Notes 11 &
13)........................................................... $1,595,553 $ 673,332 $ 742,110
Accrued payroll costs........................................... 1,522,743 1,457,901 2,502,950
Current portion of notes payable and capital lease obligations
(Note 5)...................................................... 66,471 208,072 192,921
Current portion of payables to related parties (Note 7)......... 23,000 23,000 64,124
Income taxes payable (Note 6)................................... 43,208 572,546 555,417
---------- ----------- ------------
Total current liabilities................................ 3,250,975 2,934,851 4,057,522
Notes payable and capital lease obligations, less current portion
(Note 5)........................................................ -- 494,485 418,707
Payables to related parties, less current portion (Note 7)........ 24,264 5,993 5,993
Other long-term liabilities (Notes 9 & 11)........................ 1,273,698 592,105 607,696
---------- ----------- ------------
Total liabilities........................................ 4,548,937 4,027,434 5,089,918
---------- ----------- ------------
Commitments and contingencies (Note 11)
Shareholders' Equity:
Preferred stock, par value $.01; 15,000,000 shares authorized
and none issued and outstanding............................... -- -- --
Common stock, $.01 par value; 15,000,000 shares authorized,
3,937,689, 4,983,104 and 4,991,578 issued, respectively (Notes
1 & 13)....................................................... 39,377 49,831 49,916
Additional paid-in capital...................................... 1,773,763 13,222,246 13,351,017
Stock repurchase obligation (Note 11)........................... (924,072) -- --
Stock subscriptions receivable (Notes 7 & 13)................... (36,182) (17,589) (17,589 )
Retained earnings............................................... 1,581,944 4,594,740 5,620,008
Less reacquired stock at cost; 0, 169,187 and 169,187 shares,
respectively (Note 11)........................................ -- (924,968) (924,968 )
---------- ----------- ------------
Total shareholders' equity............................... 2,434,830 16,924,260 18,078,384
---------- ----------- ------------
Total liabilities and shareholders' equity............... $6,983,767 $20,951,694 $23,168,302
========== ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 51
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net service revenues............. $40,345,544 $40,789,352 $45,654,862 $9,562,347 $16,889,273
Direct cost of services.......... 26,125,588 24,851,849 25,460,019 5,359,069 9,718,793
----------- ----------- ----------- ---------- -----------
Gross profit........... 14,219,956 15,937,503 20,194,843 4,203,278 7,170,480
Selling, general and
administrative expenses........ 12,775,271 15,008,803 15,231,842 3,362,460 5,372,375
Depreciation and amortization
expense........................ 298,380 248,428 511,961 89,431 236,764
Combination expenses (Note 13)... -- 2,251,044 -- -- --
Other (income) expense:
(Notes 8 & 11)
Dividend and interest (income)... (22,963) (62,026) (213,936) -- --
Interest expense................. 11,761 29,724 133,033 -- --
Other (income) expense, net...... 44,973 (1,125,189) (489,350) (460,604) (147,439)
----------- ----------- ----------- ---------- -----------
Income (loss) before
taxes and minority
interest............. 1,112,534 (413,281) 5,021,293 1,211,991 1,708,780
Provision for income taxes
(Note 6)....................... 447,960 186,165 2,008,497 484,796 683,512
----------- ----------- ----------- ---------- -----------
Income (loss) before minority
interest....................... 664,574 (599,446) 3,012,796 727,195 1,025,268
Minority interest in subsidiary
income......................... 14,985 -- -- -- --
----------- ----------- ----------- ---------- -----------
Net income (loss) (Note
1)................... $ 649,589 $ (599,446) $ 3,012,796 $ 727,195 $ 1,025,268
========== ========== ========== ========= ==========
Net income (loss) per share
(Notes 1 and 15)............... $ 0.20 $ (0.17) $ 0.71 $ 0.19 $ 0.20
========== ========== ========== ========= ==========
Weighted average shares
outstanding (Notes 1 and 15)... 3,309,268 3,519,405 4,243,927 3,881,320 5,169,104
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 52
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCK STOCK REACQUIRED STOCK TOTAL
------------------ PAID-IN REPURCHASE SUBSCRIPTIONS RETAINED -------------------- SHAREHOLDERS'
SHARES AMOUNT CAPITAL OBLIGATION RECEIVABLE EARNINGS SHARES AMOUNT EQUITY
--------- ------- ----------- ---------- ------------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1992......... 3,308,274 $33,083 $ 652,309 -- $ (31,365) $1,834,866 -- -- $ 2,488,893
Net income......... 649,589 649,589
Additional paid-in
capital from
issuance of
subsidiary common
stock............ 84,622 84,622
Subsidiary purchase
of subsidiary
common stock..... (37,214) (37,214)
Issuance of common
stock............ 1,989 20 8,323 8,343
Payments on stock
subscriptions
receivable....... 29,980 29,980
Distribution to
shareholders..... (150,000) (150,000)
--------- ------- ----------- ---------- ------------- ---------- -------- --------- -------------
Balance at December
31, 1993......... 3,310,263 33,103 708,040 -- (1,385) 2,334,455 -- -- 3,074,213
Net income of TAP
prior to TAP
conversion from S
Corp to C Corp
(Jan. 1, 1994
through Aug. 31,
1994)............ 81,220 81,220
Constructive
distribution of S
corporation
retained
earnings......... 469,405 (469,405)
Issuance of common
stock to minority
shareholders
(Notes 7 and
13).............. 627,426 6,274 596,318 (36,182) 316,340 882,750
Net loss subsequent
to conversion of
TAP to C Corp
(Sept. 1, 1994
through Dec. 31,
1994)............ (680,666) (680,666)
Payments on stock
subscriptions
receivable....... 1,385 1,385
Stock repurchase
obligation (Note
11).............. $ (924,072) (924,072)
--------- ------- ----------- ---------- ------------- ---------- -------- --------- -------------
Balance at December
31, 1994......... 3,937,689 $39,377 $ 1,773,763 $ (924,072) $ (36,182) $1,581,944 -- $ -- $ 2,434,830
Issuance of common
stock............ 1,040,000 10,400 11,391,746 11,402,146
Net income......... 3,012,796 3,012,796
Exercise of stock
options.......... 5,415 54 32,219 32,273
Payments on stock
subscriptions
receivable....... 18,593 18,593
Reacquired stock
(Note 11)........ 924,072 (169,110) (924,072)
Reacquired escrow
shares........... (77) (896) (896)
Tax benefit related
to employee stock
options.......... 24,518 24,518
--------- ------- ----------- ---------- ------------- ---------- -------- --------- -------------
Balance at December
31, 1995......... 4,983,104 49,831 13,222,246 -- (17,589) 4,594,740 (169,187) (924,968) 16,924,260
(Unaudited):
Net income......... 1,025,268 1,025,268
Exercise of stock
options.......... 8,474 85 46,420 46,505
Tax benefit related
to employee stock
options.......... 82,351 82,351
--------- ------- ----------- ---------- ------------- ---------- -------- --------- -------------
Balance at March
31,
1996............. 4,991,578 $49,916 $13,351,017 $ -- $ (17,589) $5,620,008 (169,187) $(924,968) $ 18,078,384
======== ======= ========== ========= ========== ========= ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 53
ROMAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ 649,589 $ (599,446) $ 3,012,796 $ 727,195 $ 1,025,268
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 298,380 248,428 511,961 89,431 236,764
Provision for losses on accounts and notes
receivable........................................ 162,649 215,362 290,250 -- (90,624)
Gain on disposal of fixed assets.................... (11,163) (1,000) (95) -- --
Minority interest................................... 14,985 -- -- -- --
Deferred taxes...................................... (107,869) (281,201) (63,836) -- --
(Increase) decrease in operating assets:
Trade receivables, net.............................. (296,727) (202,760) (4,423,705) (1,823,140) (3,033,235)
Notes receivable from franchisees, current.......... 34,268 62,923 (39,790) (127,311) (65,731)
Prepaid expenses and other current assets........... 90,253 (493,172) 396,847 542,572 (452,654)
Notes receivable from franchisees, less current
portion........................................... 45,606 95,215 23,468 12,024 --
Other assets, net................................... (64,990) (118,403) (255,377) (130,004) (38,175)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities...... 242,538 401,855 (922,221) (210,773) 68,778
Accrued payroll costs............................... 216,617 404,583 (64,842) 170,496 1,045,049
Income taxes payable................................ (200,416) (72,467) 553,856 383,931 65,222
Other long-term liabilities......................... 71,524 330,381 (681,593) (24,371) 15,591
---------- ---------- ----------- ----------- -----------
Cash (used in) provided by operating
activities.................................... 1,145,244 (9,702) (1,662,281) (389,950) (1,223,747)
---------- ---------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures.................................. (247,107) (119,772) (1,302,068) (183,051) (167,368)
Proceeds from sale of furniture and equipment, net.... 48,565 13,589 11,700 -- (5,963,163)
Proceeds from the sale of short-term investments...... -- 17,796 -- 153,995 7,243,356
Payments for purchase of short-term investments....... (69,882) -- (7,655,637) -- --
---------- ---------- ----------- ----------- -----------
Cash used in investing activities............... (268,424) (88,387) (8,946,005) (29,056) 1,112,825
---------- ---------- ----------- ----------- -----------
Cash flows from financing activities:
Payments on notes receivable from stock
subscriptions....................................... 29,980 49,825 18,593 18,593 --
Payments on notes payable............................. (682,889) (196,001) (570,098) (200,002) (90,929)
Payments on notes payable to related parties.......... (16,704) (89,345) (18,271)
Proceeds from issuance of notes payable............... -- 16,294 -- (47,264) --
Issuances of notes receivable from stock
subscription........................................ -- -- -- -- 41,124
Due to related parties................................ 71,874 -- --
Payments on notes receivable from related parties..... 40,475 10,268 96,110 4,239 110,849
Issuances of notes receivable from related parties.... (47,351) (172,199) (438,741) -- (26,963)
Additional paid-in capital from issuance of subsidiary
stock............................................... 84,622 -- -- -- --
Stock repurchases from subsidiaries................... (37,214) -- -- -- --
Proceeds from issuance of common stock................ 8,343 -- 11,402,146 -- --
Proceeds from exercise of stock options............... -- -- 32,273 -- 46,505
Repurchase of stock................................... -- -- 896 -- --
Distribution to shareholders.......................... (150,000) -- -- -- --
---------- ---------- ----------- ----------- -----------
Cash provided by (used in) financing activities..... (698,864) (381,158) 10,522,908 (224,434) 80,586
---------- ---------- ----------- ----------- -----------
Increase (decrease) in cash and cash equivalents........ 177,956 (479,247) (85,378) (643,440) (30,336)
Cash and cash equivalents at beginning of year.......... 1,006,435 1,184,391 705,144 705,144 619,766
---------- ---------- ----------- ----------- -----------
Cash and cash equivalents at end of year................ $1,184,391 $ 705,144 $ 619,766 $ 61,704 $ 589,430
========= ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 54
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Romac International, Inc. (the "Company") was formed on August 31, 1994 as
a result of a business combination of a specialty staffing services firm, in
operation under the ROMAC(R) name since 1966, and three of its largest
franchisees, by exchanging 3,055,906 shares of its common stock for
substantially all of the outstanding stock of FMA International, Inc. and its
subsidiaries ("Romac-FMA"), Romac and Associates, Inc. and Subsidiary ("Romac
Portland"), Romac and Associates of Boston, Inc. ("Romac Boston") and by
exchanging 153,523 shares of its common stock for all of the outstanding stock
of Temporary Accounting Professionals, Inc. ("TAP"). The Company is organized
into three divisions: the Professional Temporary Division provides professional
temporary personnel in the fields of finance and accounting; the Contract
Services Division provides information systems personnel generally on a
longer-term contractual basis; and the Search Division provides permanent
placement of specialized personnel in the fields of accounting and finance,
information systems, health care, pharmaceutical research, manufacturing
services, sales and marketing, human resources and insurance. The Company serves
principally Fortune 1000 companies in nine metropolitan markets through
Company-owned locations and seven additional metropolitan markets through
franchisees and licensees.
<TABLE>
<CAPTION>
OWNED LOCATIONS FRANCHISED/LICENSED LOCATIONS
- -------------------------------- --------------------------------
<S> <C>
Atlanta San Francisco
Boston Kansas City
Chicago New Orleans
Dallas Raleigh
Fort Lauderdale/Miami Minneapolis
Houston St. Louis
Philadelphia Valley Forge
Orlando
Tampa
</TABLE>
Share Exchanges
The share exchanges described above were accounted for as poolings of
interests, and accordingly, the accompanying financial statements have been
restated to include the accounts and operations of the combined companies for
all dates and periods prior to the Combination. Shares of the Company were also
exchanged for minority interests of the merged subsidiaries of Romac-FMA
resulting in excess fair market value of the minority interest shares over the
net book value of the minority interest which is recorded as goodwill. The
results of operations attributable to the minority interests have been included
in the Company's consolidated financial statements beginning on the acquisition
date (Notes 4 & 13).
Stock Split
On April 21, 1995, the Company declared a 1.023-for-1 stock split on its
common stock. All share-related data in these consolidated financial statements
have been adjusted retroactively to give effect to this split as if it had
occurred at the beginning of the earliest period presented.
Initial Public Offering
The Company completed its initial public offering of 1,040,000 shares of
common stock on August 12, 1995. The proceeds of $11,402,146, net of
underwriters' discounts and other offering costs, were used to pay down debt,
reacquire stock, general working capital purposes, and to finance business
acquisitions.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions have
been eliminated in the consolidated financial statements.
F-7
<PAGE> 55
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Minority Interest
Minority interest represented other shareholders' interest in certain
majority-owned subsidiary companies of Romac-FMA. Prior to the share exchange
agreement, minority interests were reduced by outstanding stock subscriptions
receivable due from the minority shareholders (Note 7). Subsequent to the share
exchange agreement, stock subscriptions receivable from minority shareholders of
Romac-FMA were exchanged for stock subscriptions of the Company's shares and are
now reflected as a reduction of shareholders' equity.
Cash and Cash Equivalents
The Company classifies all highly-liquid investments with a maturity of
three months or less as cash equivalents.
Investments
Investments in mutual funds and common stock have been classified as
available for sale and, as a result, are stated at fair value. Mutual funds
available for current operations are classified in the balance sheet as
short-term investments while investments in common stock are classified as other
assets. Unrealized holding gains and losses are included as a component of
shareholders' equity until realized. At December 31, 1995, there were no
unrealized gains or losses.
Furniture and Equipment
Furniture and equipment are carried at cost, less accumulated depreciation.
Major additions are capitalized, while repairs and maintenance are charged to
expense as incurred. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets. The cost of leasehold
improvements is amortized using the straight-line method over the term of the
related leases which range from 3 to 7 years (Note 3).
Revenue Recognition
Net service revenues consist of sales from Company-owned and licensed
offices, and royalties received from franchised operations, less credits and
discounts. The Company recognizes revenue for the Professional Temporary and
Contract Services Divisions based on hours worked by assigned personnel on a
weekly basis. Search Division revenues are recognized in contingency search
engagements upon the successful completion of the assignment. In retained search
engagements the initial retainer is recognized upon execution of the agreement,
with the balance recognized on completion of the search. Reserves are
established to estimate losses due to placed candidates not remaining in
employment for the Company's guarantee period, typically 90 days. Franchise fees
are determined based upon a contractual percentage of the revenue billed by
franchisees. Costs relating to the support of franchised operations are included
in the Company's selling, general and administrative expenses. The Company
includes revenues and related direct costs of licensed offices in its net
service revenues and direct cost of services, respectively. Commissions paid to
licensees is based upon a percentage of the gross profit generated, and is
included in the Company's direct cost of services.
F-8
<PAGE> 56
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company accounts for income taxes under the principles of FAS 109
Accounting for Income Taxes. FAS 109 requires an asset and liability approach to
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of differences between the carrying amounts and the tax bases
of other assets and liabilities. The tax effects of deductions attributable to
employees' disqualifying dispositions of shares obtained from incentive stock
options are reflected in additional paid-in capital.
TAP elected under the Internal Revenue Code to be an S corporation.
Historically, the shareholders of TAP included their pro rata share of income or
loss in their individual returns. Accordingly, these financial statements
reflect no provision for income taxes related to pre-tax earnings of TAP through
August 31, 1994. Effective with the share exchange on August 31, 1994, TAP's S
corporation status was converted to C corporation status and TAP's subsequent
earnings are subject to corporate taxes (Note 6).
Stock Based Compensation
The Company will adopt Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123") during 1996. Upon
adoption of SFAS 123, the Company intends to retain the intrinsic value method
of accounting for stock based compensation and disclose pro forma net income and
earnings per share amounts.
Earnings Per Share
Earnings per share is computed by dividing net income (loss), by the
weighted average number of common and common share equivalents outstanding.
Common stock equivalents consist of shares subject to stock options.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform with 1995 presentation.
Interim Financial Information
The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring accruals, necessary for a fair statement of the results of the interim
periods.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of December 31,
1995. Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date and current estimates of fair value may differ significantly from the
amounts presented herein. The fair values of the Company's financial instruments
are estimated based on current market rates and instruments with the same risk
and maturities. The fair values of cash and cash equivalents, accounts
receivable, short-term investments, accounts payable, notes payable and payables
to related parties approximate the carrying values of these financial
instruments.
F-9
<PAGE> 57
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. FURNITURE AND EQUIPMENT
Major classifications of furniture and equipment and related asset lives
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
USEFUL LIFE 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Furniture, fixtures and equipment.................. 5 years $ 923,707 $1,113,849
Computer equipment................................. 5 years 291,035 1,843,533
Equipment under capital lease...................... lease term 180,690 865,040
Leasehold improvements............................. lease term 93,654 152,689
---------- ----------
1,489,086 3,975,111
Less accumulated depreciation and amortization... 1,174,555 1,569,827
---------- ----------
$ 314,531 $2,405,284
========= =========
</TABLE>
4. OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1994 1995 1996
-------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill, net....................................... $682,303 $ 574,444 $6,298,270
Investment in common stock.......................... 52,500 52,500 52,500
Cash surrender value of life insurance policies..... 172,489 413,698 443,105
Other............................................... 37,134 51,302 52,215
-------- ---------- ----------
$944,426 $1,091,944 $6,846,090
======== ========= =========
</TABLE>
Goodwill
Goodwill of $602,592 relating to the exchange of the minority interests of
the merged subsidiaries of Romac-FMA (Notes 1 & 13) was recorded at August 31,
1994 and is being amortized straight-line over a period of 15 years.
Approximately $550,000 remains unamortized at December 31, 1995. The remaining
goodwill of $24,444 relates to previous business acquisitions and is being
amortized on a straight-line basis over a period of five years. Management
periodically reviews the potential impairment of goodwill in order to determine
the proper carrying value of goodwill as of each balance sheet date presented.
Goodwill amortization expense of $87,800, $102,300 and $107,859 was recorded for
the years ended December 31, 1993, 1994, and 1995, respectively. Goodwill
related to acquisitions subsequent to December 31, 1995 is discussed in Note 14.
Cash Surrender Value
The cash surrender value of life insurance policies relates to policies
maintained on key employees used to fund deferred compensation agreements (Note
9) and an insurance policy, with a cash surrender value of $33,103 and $40,211
at December 31, 1994 and 1995, respectively, required under the terms of a note
payable to cover a key employee in an amount sufficient to pay the unpaid
balance of principal and interest on the note. Additionally, the Company
maintains key life insurance on officers with a cash surrender value of $111,095
at December 31, 1995.
F-10
<PAGE> 58
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. NOTES PAYABLE
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- --------
<S> <C> <C>
12% Note payable to former shareholder due in monthly installments
of $8,334 including interest commencing June 1992 through June
1993, quarterly installments of $50,000 including interest
commencing September 1993 through March 1995 and a final
installment of $1,733 including interest in June 1995........... $50,177 $ --
Installment notes payable at interest rates ranging from 5.75% to
10%, maturing at various dates through May 1995................. 16,294 --
Obligation under capital lease with monthly payments of principal
and interest at 14% through March 1998.......................... -- 303,656
Obligations under capital lease with monthly payments of principal
and interest at 15% through March 1999.......................... -- 398,901
------- --------
66,471 702,557
Less current maturities........................................... 66,471 208,072
------- --------
$ -- $494,485
======= ========
</TABLE>
Aggregate debt maturities including notes payable from related parties (see
Note 7) at December 31, 1995 are as follows: 1996 -- $231,072; 1997 -- $313,098;
1998 -- $168,413; 1999 -- $18,967.
In December 1994, the Company reached an agreement to consolidate its line
of credit arrangements to a $1.5 million credit facility bearing an interest
rate of 2.9% plus the 30 day commercial paper rate, (8.93% and 8.71% as of
December 31, 1994 and 1995, respectively), expiring and subject to renewal on
November 30, 1995. In November, this credit facility agreement was extended
through March 31, 1996 and was increased to $2.0 million. The consolidated line
of credit is secured by the Company's accounts receivable and deposit accounts.
This line of credit agreement contains restrictive covenants which require the
maintenance of certain financial ratios. The Company is in compliance with all
covenants as of December 31, 1995. No amounts were outstanding on any of these
lines of credit at December 31, 1994 and 1995.
6. INCOME TAXES
Prior to the August 31, 1994 share exchanges (Note 1) the various entities
that combined with the Company filed separate income tax returns. The provision
for income taxes has been calculated based upon those individual tax reporting
entities and does not represent the provision for income taxes as if the
entities filed a consolidated income tax return through the date of the share
exchanges. Subsequent to the share exchanges, the provision is calculated on a
consolidated basis.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Current:
Federal........................................... $ 471,983 $ 418,170 $1,657,867
State............................................. 83,788 49,196 414,466
Deferred............................................ (107,811) (281,201) (63,836)
--------- --------- ----------
$ 447,960 $ 186,165 $2,008,497
========= ========= =========
</TABLE>
F-11
<PAGE> 59
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes for 1993 and through the date of the share
exchanges in 1994, does not include a provision for the income of TAP during the
period that TAP was an S Corporation. If TAP were taxable as a C corporation at
the highest federal marginal tax rate, the provision for income taxes would
increase, on a pro forma basis, by $13,813 and $27,615 for the years 1993 and
1994, respectively.
The provision for income taxes shown above varied from the statutory
federal income tax rates for those periods as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1993 1994 1995
---- ----- ----
<S> <C> <C> <C>
Federal income tax rate....................................... 34.0% (34.0)% 34.0%
Effect of graduated tax rates................................. (2.0) -- --
TAP S corporation income...................................... (1.2) (9.1) --
State income taxes, net of federal tax benefit................ 4.4 (4.0) 5.3
Non-deductible items.......................................... 2.4 140.2 1.1
Goodwill amortization......................................... 2.3 9.2 .4
Life insurance benefits....................................... -- (47.2) .2
Other......................................................... .4 -- (1.0)
---- ----- ----
Effective tax rate............................................ 40.3% 55.1% 40.0%
==== ===== ====
</TABLE>
Nondeductible items consist primarily of merger and acquisition costs and
meals and entertainment expenses which are not deductible for tax purposes,
resulting in higher income tax expense.
Deferred income tax assets and liabilities shown on the balance sheet are
comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- --------
<S> <C> <C>
Deferred taxes -- current:
Assets
Allowances for bad debts................................ $126,368 $244,773
Accrued liabilities..................................... 88,447 63,601
-------- --------
214,815 308,374
Liabilities
Cash to accrual adjustment.............................. (40,433) --
-------- --------
Net deferred tax asset -- current....................... $174,382 $308,374
======== ========
Deferred taxes -- non-current:
Assets
Deferred compensation................................... $126,027 $170,112
Deferred rent........................................... 68,328 50,139
-------- --------
194,355 220,251
Liabilities
Depreciation............................................... (5,694) (101,746)
-------- --------
Net deferred tax asset -- non-current...................... $188,661 $118,505
======== ========
</TABLE>
A valuation allowance on the deferred tax assets has not been recorded due
to the presence of taxable income in years available for carryback.
F-12
<PAGE> 60
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED PARTIES
Receivables from Related Parties
Receivables from related parties are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- --------
<S> <C> <C>
Receivables from officers and shareholders................... $246,999 $559,356
Other employee receivables................................... 83,102 113,376
-------- --------
330,101 672,732
Less current maturities...................................... 180,965 186,219
-------- --------
$149,136 $486,513
======== ========
</TABLE>
Receivables from officers and shareholders include receivables for premiums
paid on split dollar life insurance policies (see Note 9). Repayment terms on
the remaining unsecured receivables range from one to five years at rates of 7%
to 11%.
Payables to Related Parties
Notes payable to related parties include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- --------
<S> <C> <C>
Note payable to a related party, principal and 9% interest,
payable in bi-monthly installments through May, 1997....... $ 47,264 $ 28,993
Less current maturities...................................... 23,000 23,000
-------- --------
$ 24,264 $ 5,993
======== ========
</TABLE>
Related Party Leases
The Company has operating leases with related parties as discussed in Note
11.
Subsidiary Stock Subscription Notes Receivable
From 1989 to August 31, 1994, certain subsidiaries of Romac-FMA issued
stock to key employees of its respective majority owned subsidiaries of
Romac-FMA in exchange for stock subscription notes receivable. At December 31,
1994 and 1995, $36,182 and $17,589, respectively, of subscription notes
receivable were outstanding and collateralized by the respective shares of the
subsidiaries' stock. The outstanding balances of these notes receivable were
reflected as a reduction of the minority interest through August 31, 1994, at
which time the minority interests of certain subsidiaries of Romac-FMA were
exchanged for shares in the Company and the remaining outstanding subscription
receivables are now shown as a reduction of shareholders' equity.
Accrued Liabilities
In October 1995, the Company entered into a strategic consulting agreement
with a company affiliated with one of its outside board members. Services under
this agreement are to be completed by December 1996 at a cost of approximately
$200,000.
8. FRANCHISE REORGANIZATION
During fiscal 1994, the Company reached an agreement with two of its
franchisees (the Philadelphia and Memphis locations) wherein the Company agreed
to terminate the remaining term of their franchise
F-13
<PAGE> 61
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreements in exchange for immediate cash payments and notes receivable
aggregating $560,000 and, with respect to the Philadelphia agreement, a
percentage of gross revenue for a specified time period, in lieu of the future
cash flows anticipated under the franchise agreement. The revenues from these
transactions have been reflected as other income for the period and are included
in cash flows from operations. Approximately $100,000 and $35,174 of note
payments remain receivable from these two franchisees at December 31, 1994 and
1995, respectively.
In January 1995, the Company reached agreements with the Arlington and
Dallas franchisees to terminate their franchise agreements. The terms of the
Arlington agreement included a $260,000 note receivable at 9% interest, payable
in 18 equal monthly installments. The agreement also includes a covenant not to
compete in the Arlington market for a four month period beginning January 1,
1995. The Dallas arrangement included a $175,000 cash settlement and the Company
retained the rights to the phone listing and other business records at the
Dallas location. The revenues from these transactions have been reflected as
other income in the first quarter of 1995. Approximately $90,475 of payments
remain receivable form Arlington at December 31, 1995.
The remaining notes receivable from franchisees consists primarily of
unsecured notes for franchise fees due from various franchisees. Repayment terms
range from one to five years at rates of 7% to 9%.
Franchise royalties amounted to $1,600,000, $886,000 and $487,000, for the
years ended December 31, 1993, 1994 and 1995, respectively.
9. EMPLOYEE BENEFIT PLANS
401(k) Savings Plan
Effective May 1, 1993, Romac-FMA implemented a qualified defined
contribution 401(k) plan covering substantially all full-time employees, except
officers and certain highly compensated employees. The plan offers a savings
feature and Company matching contributions. Employer matching contributions are
discretionary and are funded annually as approved by the Board of Directors.
Assets of this plan are held in trust for the sole benefit of employees.
Employer contributions to the 401(k) totalled $23,500 $28,236 and $22,406 in
1993, 1994 and 1995, respectively. Romac Boston and Romac Portland also have
qualified defined contribution 401(k) plans covering substantially all full-time
employees. No employer matching contributions were made for the years ended
December 31, 1993, 1994 and 1995.
Employee Stock Ownership Plan
Romac Boston maintains an employee stock ownership plan covering all
eligible employees meeting the length of service requirements. Effective with
the share exchange described in Note 1, the outstanding shares of the employee
stock ownership plan for Romac Boston were exchanged for 29,893 shares of the
Company. Contributions are determined solely at the discretion of its Board of
Advisors. No contributions were made for the three years ended December 31,
1995. These shares were sold during the Company's initial public offering and
the cash proceeds were entrusted to the plan.
Deferred Compensation Plan
The Company has a non-qualified deferred compensation plan pursuant to
which eligible officers and highly compensated key employees may elect to defer
part of their compensation to later years. The Company accrues interest and
discretionary Company matching contributions. These amounts, which are
classified as other long-term liabilities, are payable upon retirement or
termination of employment, and at December 31, 1994 and 1995, aggregated
$332,440 and $433,075, respectively. The Company has insured the lives of the
participants in the deferred compensation program, to assist in the funding of
the deferred compensation liability. The cash surrender value of these
Company-owned life insurance policies of $139,386 and $262,392
F-14
<PAGE> 62
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
at December 31, 1994 and 1995, respectively, is included in other assets.
Compensation expense of $108,300, $129,200 and $45,100 was recognized for the
plan for the years ended December 31, 1993, 1994, and 1995, respectively.
Split Dollar Life Insurance
In 1995, the company entered into split dollar and cross-purchase split
dollar life insurance agreements with several officers and their estates whereby
the Company pays a portion of the life insurance premiums on behalf of the
officers and their estates. The Company has been granted a security interest in
the cash value and death benefit of each policy equal to the amount of the
cumulative premium payments made by the Company. The intent of these agreements
is to, in the event of an officer's death, provide liquidity to pay estate taxes
and to provide surviving officers with the ability to purchase shares from a
deceased officer's estate, minimizing the possibility of a large block of the
Company's common shares being put on the open market to the potential detriment
of the Company's market price and to allow the Company to maintain a
concentration of voting power among its officers. The total premiums paid of
$381,300 is included in related party receivables for the year ended December
31, 1995 (see Note 7).
10. STOCK OPTION PLANS
During 1994, the Company established an incentive stock option plan which
authorized the issuance of options to purchase common stock to employees. The
maximum number of shares of common stock that could be issued under the plan
could not exceed 409,200. In 1995 the employee stock option incentive plan was
amended to increase the number of shares of common stock that may be issued
under the plan to 767,250. During 1995, the Company established a non-employee
director stock option plan which authorized the issue of options to purchase
common stock to non-employee directors. The maximum number of shares of common
stock that can be issued under the plan is 100,000.
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
NON-
EMPLOYEE EMPLOYEE
INCENTIVE DIRECTOR
STOCK STOCK EXERCISE
OPTION OPTION PRICE
PLAN PLAN TOTAL PER SHARE
----------- ---------- ------- ------------
<S> <C> <C> <C> <C>
Granted................................. 137,746 -- 137,746 $ 5.46
Exercised............................... -- -- --
----------- ---------- ------- ------------
Outstanding as of December 31, 1994..... 137,746 -- 137,746
Granted................................. 415,853 20,000 435,853 $5.96-$18.75
Exercised............................... 5,415 -- 5,415 $ 5.96
----------- ---------- ------- ------------
Outstanding as of December 31, 1995..... 548,184 20,000 568,184
========== ========= ======= ===========
Exercisable at December 31:
1995................................ 156,823
1996................................ 152,326 10,000
1997................................ 138,283 10,000
1998................................ 90,643
1999................................ 10,109
</TABLE>
Tax benefits resulting from the disqualifying dispositions of shares
acquired under the Company's employee incentive stock option plan reduced taxes
currently payable by $24,518 in 1995. Such benefits are credited to additional
paid-in capital.
F-15
<PAGE> 63
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
Operating Leases
During 1994, the Company transferred its interest in a limited partnership
to certain shareholders of the Company by assuming the Company's subscription
note payable for the limited partnership interest for an amount of $49,000,
which approximated the fair value of the limited partnership investment. The
principal asset of the partnership is an office building in which the Company
leases space for use as its headquarters. The Company leases this space under an
operating lease with monthly payments of $24,324, expiring in April 2001. The
Company also leases office space for Romac Portland from a related party at an
annual rental of $74,700 subject to adjustment as defined through December 31,
2000. The Company leases other space and various equipment under operating
leases expiring at various dates with some leases cancellable upon 30 to 90 days
notice. The leases require payment of taxes, insurance and maintenance costs in
addition to rental payments.
Future minimum lease payments under operating leases are summarized as
follows: 1996, $988,961; 1997, $869,316; 1998, $818,384; 1999, $692,732; and
$511,572 thereafter. Minimum obligations have not been reduced by minimum
sublease rentals of $221,500 due under a noncancellable sublease.
Rental expense under all operating leases was $712,904, $621,696 and
$759,452 for 1993, 1994 and 1995.
Noncancellable Processing Commitment
The Company has an agreement with a third party processor ("processor") who
provides certain services for some of the Company's franchised and licensed
temporary placement operations; the cost of such services is a percentage of
gross billings as defined within the agreement. Pursuant to certain contract
termination provisions, the Company would be required to pay $500,000 in the
event of termination of such agreement. The agreement continues in effect until
the aggregate of all amounts actually collected and paid to the processor from
September 1, 1985 exceeds $5,000,000. The cumulative amounts processed were
$2,963,873, $3,840,205 and $4,093,619 as of December 31, 1993, 1994 and 1995,
respectively.
Stock Repurchase Agreements
Stock repurchase agreements between certain subsidiaries of the Company
(former Romac-FMA subsidiaries) and certain shareholders provide for the
purchase of their shares of the subsidiaries' stock in the event of disability
or death of the shareholder, at market value as determined by an independent
third party. The commitment under such agreements is partially funded by term
life insurance and disability policies on these shareholders owned by the
Company. In connection with these redemption agreements, the Company had
employment agreements with such key employees until consummation of the share
exchange, wherein all such employment agreements were terminated, with the
exception of those discussed below and the repurchase agreements were amended to
reflect the receipt of shares of the Company in exchange for shares owned in the
former Romac-FMA subsidiaries. On April 26, 1995, all such agreements were
amended to convert the Company's repurchase obligation to an option to purchase,
at the discretion of the Company.
In October 1994, the Company became liable to repurchase approximately
169,110 shares under one of the stock repurchase agreements due to the death of
the shareholder. Under the terms of the repurchase agreement, the liability was
to be paid in five equal annual installments beginning March 1, 1995, with
interest payable at 9%. The liability of $924,072 is included in the amount of
$184,814 and $739,258 in accrued liabilities (current portion) and other
long-term liabilities, respectively, as of December 31, 1994. The note was paid
in full as of December 31,1995. The related life insurance proceeds of
approximately $500,000 is included in other current assets and other income for
the year ended December 31, 1994. The total remaining contingent obligation
under these stock repurchase agreements at December 31, 1994 is approximately
$2,500,000. The amendment of the stock purchase agreements on April 26, 1995 by
the Company and its
F-16
<PAGE> 64
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain shareholders eliminated all contingent stock repurchase obligations.
Accordingly, the related life insurance policies have been terminated.
Indemnifications
Certain contingencies existing at the date of the share exchange
transaction have been specifically indemnified through escrow accounts
established under the share exchange agreements.
Litigation
The Company is involved in litigation in the ordinary course of business
which will not, in the opinion of management, have a material effect on the
results of operations or financial condition of the Company.
Employment Agreements
Effective January 1, 1995, the Company entered into employment agreements
with certain executive officers which provide for minimum compensation and
salary and certain benefit continuation for a two year period under certain
circumstances. The agreements also provide for a payment of amounts two times
their annual salary if a change in control (as defined) of the Company occurs
and include a covenant against competition with the Company which extends for
one year after termination for any reason. The Company's liability at December
31, 1995 would be approximately $1.2 million in the event of a change in control
or if all of the employees under contract were to be terminated by the Company
without good cause (as defined) under these contracts.
12. SUPPLEMENTAL CASH FLOW INFORMATION
The Company's non-cash investing and financing activities and cash payments
for interest and income taxes were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- ----------
<S> <C> <C> <C>
Goodwill recorded in connection with the exchange of
511,387 shares of common stock for outstanding
minority interest (Notes 1, 4, & 13)................ $ -- $602,592 $ --
Contribution of minority interest liability at date of
share exchange transaction to retained earnings
(Notes 1, 7 & 13)................................... -- 316,340 --
Contribution of S Corporation retained earnings to
additional paid-in capital for change in TAP tax
status to C Corporation status (Note 1)............. -- 469,405 --
Accrued liability and long-term liability for stock
repurchase obligation (Note 11)..................... -- 924,072 --
Capital lease transaction............................. -- -- 1,206,184
Cash paid during the year for:
Interest............................................ $ 81,700 $ 29,700 $ 133,033
Income taxes........................................ $734,800 $539,900 $1,514,983
</TABLE>
13. BUSINESS COMBINATION
As described in Note 1, certain minority shares exchanged under the share
exchange agreement resulted in excess fair market value of the minority interest
shares over the net book value of the minority interest being recorded as
goodwill. In connection with the share exchange agreements and related
restructuring, approxi-
F-17
<PAGE> 65
ROMAC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
mately $2,250,000 of combination expenses were incurred. Included in this amount
is approximately $1.3 million of merger and acquisition costs, primarily related
to brokerage, legal and accounting fees, which were incurred and expensed in
1994. Additionally, in 1994 the Company announced the decision to consolidate
and restructure its operations. As a result, management closed its Portland
office (former corporate headquarters) effective February 1995, and terminated
eight employees at the Portland and Boston locations at an approximate cost of
$900,000 which was expensed in 1994. As of December 31, 1994 and 1995,
approximately $390,000 and $70,000 of severance remains accrued in accounts
payable and other accrued expenses and $190,000 and $160,000 of lease costs
remain accrued in other long-term liabilities, respectively.
14. SUBSEQUENT EVENTS
On January 10, 1996, the Company completed the acquisition of all of the
assets except for cash and accounts receivable of Venture Network Corporation,
Inc. ("Venture"), a business engaged in the business of providing permanent and
contract services for information systems personnel. The purchase price,
including a non-compete agreement, is approximately $1.1 million and is subject
to adjustment upon attainment of certain operating results. In February 1996,
the Company entered into an asset purchase agreement with PCS Group, Inc., a
provider of contract service information systems personnel. The purchase price,
including a non-compete agreement, is approximately $2.3 million, subject to
adjustment upon attainment of certain operating results.
Additional Subsequent Events (Unaudited)
In March 1996, the Company acquired Strategic Outsourcing, Inc. for
approximately $2.5 million in cash subject to adjustment upon attainment of
certain operating results. As of March 31, 1996, the Company recorded goodwill
of $5,793,954 related to the acquisitions subsequent to December 31,1995, net of
$66,050 of goodwill amortization.
Stock Split
On May 5, 1996, the Company declared a 2-for-1 stock split effected as a
100% stock dividend on its common stock effective as of May 15, 1996 to be
reflected in the Nasdaq national market on May 23, 1996.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Fiscal 1994
Sales..................................... $10,602,964 $10,287,830 $ 10,369,943 $ 9,528,615
Gross profit.............................. 4,424,519 4,246,911 $ 4,181,743 3,084,330
Net income (loss)......................... $ 362,963 $ 349,446 (820,707) $ (491,148)
Earnings per share........................ $ 0.11 $ 0.11 $ (0.27) $ (0.12)
Fiscal 1995
Sales..................................... $ 9,562,347 $10,051,649 $ 12,092,519 $13,948,347
Gross profit.............................. 4,203,278 4,717,960 5,325,508 5,948,097
Net income (loss)......................... $ 727,195 $ 480,778 $ 707,225 $ 1,097,598
Earnings per share........................ $ 0.19 $ 0.13 $ 0.17 $ 0.22
========== ========== ========== ==========
</TABLE>
F-18
<PAGE> 66
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholder of
Venture Networks Corporation, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations and retained earnings and of cash flows present fairly, in all
material respects, the financial position of Venture Networks Corporation, Inc.,
(the "Company") at December 31, 1995, and the results of its operations and its
cash flows for the year 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Tampa, Florida
March 20, 1996
F-19
<PAGE> 67
VENTURE NETWORKS CORPORATION, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current Assets:
Cash.......................................................................... $ 275
Trade receivables, less allowance for doubtful accounts of $10,000............ 322,307
------------
Total current assets.................................................. 322,582
Furniture and equipment, net (Note 3)......................................... 26,419
------------
Total assets.......................................................... $349,001
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other current liabilities................................ $ 3,210
Accrued payroll costs (Note 7)................................................ 217,045
Line of credit (Note 4)....................................................... 30,000
------------
Total current liabilities............................................. 250,255
Commitments and contingencies (Note 6)
Shareholders' Equity:
Common stock, no par value; 15,000 shares authorized; 7,500 issued and
outstanding................................................................ --
Retained earnings............................................................. 98,746
------------
Total shareholder's equity............................................ 98,746
------------
Total liabilities and shareholder's equity............................ $349,001
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 68
VENTURE NETWORKS CORPORATION, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
1995
-------------------
<S> <C>
Net service revenues........................................................ $ 2,112,322
Direct cost of services..................................................... 753,031
-------------------
Gross profit...................................................... 1,359,291
Selling, general and administrative expenses................................ 1,170,532
Depreciation................................................................ 9,130
Interest expense............................................................ 3,240
-------------------
Net income........................................................ 176,389
Retained earnings:
Beginning of year......................................................... 7,357
Less dividends............................................................ (85,000)
-------------------
End of year............................................................... $ 98,746
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 69
VENTURE NETWORKS CORPORATION, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
1995
------------------
<S> <C>
Cash flows from operating activities:
Net income................................................................ $ 176,389
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation........................................................... 9,130
Provision for losses on accounts receivable............................ 10,000
(Increase) decrease in operating assets:
Trade receivables.................................................... (14,028)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities....................... (969)
Accrued payroll costs................................................ 35,521
------------------
Cash provided by operating activities............................. 216,043
------------------
Cash flows from investing activities:
Capital expenditures...................................................... (3,592)
------------------
Cash used in investing activities...................................... (3,592)
------------------
Cash flows from financing activities:
Payments on line of credit................................................ (170,000)
Proceeds from line of credit.............................................. 30,000
Dividends................................................................. (85,000)
------------------
Cash used in financing activities...................................... (225,000)
------------------
Decrease in cash............................................................ (12,549)
Cash at beginning of year................................................... 12,824
------------------
Cash at end of year......................................................... $ 275
==============
Supplemental disclosures of cash flow information:
Cash paid for interest.................................................... $ 3,240
==============
Cash paid for taxes....................................................... 456
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 70
VENTURE NETWORKS CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Venture Networks Corporation, Inc. (the "Company") was formed in November
1987 for the purpose of providing contract personnel services and permanent
placement of specialized personnel in the fields of information systems,
software engineering, banking and finance. In 1993, the Company discontinued
providing services in the areas of banking and finance. The Company serves
primarily the Boston market area.
Furniture and Equipment
Furniture and equipment are carried at cost, less accumulated depreciation.
Major additions are capitalized, while repairs and maintenance are charged to
expense as incurred. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets.
Revenue Recognition
Net service revenues consist of sales less credits and discounts. The
Company recognizes revenue for Contract Services based on hours worked by
assigned personnel on a weekly basis. Search Division revenues are recognized in
contingency search engagements upon the successful completion of the search.
Reserves are established to estimate losses due to placed candidates not
remaining employment for the Company's guarantee period, typically 90 days.
Major Customers
The Company provided contract and permanent placement services of $473,000
in 1995 to two customers representing approximately 22% of total service
revenues for 1995.
Income Taxes
The Company elected to be taxed under the S Corporation provisions of the
Internal Revenue Code which provide for the taxable income of the Company to be
included in the income tax return of the individual shareholders. Accordingly,
there is no provision for income taxes included in the operating results for the
Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. The fair values of the Company's financial instruments are
estimated based on current market rates and instruments with the same risk and
maturities. The fair values of cash, accounts receivable, accounts payable and
line of credit approximate the carrying values of these financial instruments.
F-23
<PAGE> 71
VENTURE NETWORKS CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. FURNITURE AND EQUIPMENT
Major classifications of furniture and equipment and related asset lives
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIFE 1995
----------- ------------
<S> <C> <C>
Furniture, fixtures and equipment.............................. 7 years $ 14,699
Computer equipment............................................. 5 years 46,532
------------
61,231
Less accumulated depreciation.................................. (34,812)
------------
$ 26,419
==========
</TABLE>
4. LINE OF CREDIT
The Company maintains a $200,000 bank line of credit agreement under which
$30,000 was outstanding at December 31, 1995. The use of this line generally is
restricted to the extent that the company is required periodically to liquidate
its indebtedness to the bank for 30 days each year. Additionally, the Company is
subject to various covenants under the line of credit agreement. At December 31,
1995, the Company was in compliance with these covenants. Interest on borrowings
under the agreement is 1.25% above the bank's base rate; 9.50% at December 31,
1995. The line is secured by the Company's assets. The line extends through
April 30, 1996 and will not be renewed (see Note 8).
5. DISTRIBUTIONS TO SHAREHOLDERS
Venture Networks distributed $85,000 to a stockholder in 1995, a portion of
which was to fund the shareholder's individual income tax liability related to
the S corporation taxable earnings.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
Future minimum lease payments under operating leases are summarized as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------------------------------------------------------- -------
<S> <C>
1996............................................................... $11,040
1997............................................................... 7,660
1998............................................................... 300
1999............................................................... 300
2000............................................................... 300
Thereafter......................................................... 4,050
-------
$23,650
=======
</TABLE>
The Company incurred operating lease expense of $10,395 for the year ended
December 31, 1995, under a noncancelable operating lease for office facilities.
The lease expires August 31, 1997 and contains options for renewal at the end of
the lease term.
7. PROFIT SHARING PLAN
The Company adopted a defined contribution Profit Sharing Plan (the "Plan")
effective January 1, 1988. All employees of the company who are credited with at
least 1,000 hours of service during the Company's fiscal year are eligible to
participate in the Plan. Following the first year of employment, company
contributions deposited into profit sharing accounts for each employee vest 20%
for each year of service, and
F-24
<PAGE> 72
VENTURE NETWORKS CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
become fully vested after six years of service or upon retirement, death,
disability or termination of the Plan. Benefits are generally payable following
retirement, disability, death, hardship or termination of employment. During
1995, the company authorized a $50,000 contribution to the Plan to be allocated
to the participants on the basis of a percentage of their annual compensation.
This amount is included in selling, general and administrative expenses. The
payment will be made to the Plan trustee prior to the filing of the 1995 tax
return and in accordance with the terms of the Plan. As a result of the asset
sale subsequent to year end (see Note 8), management intends to terminate the
Plan subsequent to payment of the contribution.
8. SUBSEQUENT EVENTS
On January 10, 1996, the Company completed the sale of all of its assets
except for cash and trade receivables to Romac International, Inc. The sale
price, including a non-compete agreement, is in excess of book value of the
assets acquired and is subject to adjustment upon attainment of certain
operating results.
F-25
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
PCS Group, Inc.
We have audited the accompanying balance sheet of PCS Group, Inc. as of
December 31, 1995 and the related statements of income, retained earnings and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PCS Group, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Deming, Malone, Livesay & Ostroff
Louisville, Kentucky
April 18, 1996
F-26
<PAGE> 74
PCS GROUP, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current Assets:
Cash.......................................................................... $ 9,104
Trade receivables, less allowance for doubtful accounts of $17,903............ 622,838
Related party and employee receivables (Note 7)............................... 19,596
Prepaid expenses.............................................................. 1,504
------------
Total current assets.................................................. 653,042
------------
Furniture and equipment, net (Notes 1 and 3).................................... 20,836
Other assets.................................................................... 11,275
------------
Total assets.......................................................... $685,153
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit (Note 4)....................................................... $187,047
Accounts payable and other current liabilities................................ 114,093
Related party payables (Note 7)............................................... 1,979
Accrued payroll costs......................................................... 93,438
Deferred income............................................................... 80,969
------------
Total current liabilities............................................. 477,526
------------
Commitments and contingencies (Notes 6 and 8)
Stockholders' Equity:
Common stock, no par value; 1,000 shares authorized; 100 shares issued and
outstanding................................................................ 100
Paid-in capital............................................................... 4,902
Retained earnings............................................................. 202,625
------------
Total stockholders' equity............................................ 207,627
------------
Total liabilities and stockholders' equity............................ $685,153
==========
</TABLE>
See Notes to Financial Statements
F-27
<PAGE> 75
PCS GROUP, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
1995
------------------
<S> <C>
Net service revenues (Note 1)............................................... $ 3,583,233
Direct cost of services..................................................... (2,355,382)
------------------
Gross profit...................................................... 1,227,851
Selling, general and administrative expenses (Note 7)....................... (868,095)
Depreciation................................................................ (13,334)
Interest expense............................................................ (2,251)
Other income................................................................ 2,298
------------------
Net income........................................................ 346,469
Retained earnings beginning of year......................................... 61,841
Distributions (Note 5)...................................................... (205,685)
------------------
Retained earnings end of year............................................... $ 202,625
==============
</TABLE>
See Notes to Financial Statements
F-28
<PAGE> 76
PCS GROUP, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Cash flows from operating activities:
Net income.................................................................... $ 346,469
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................................... 13,334
Provision for losses on accounts receivable................................ 17,903
Increase (decrease) in operating assets:
Trade receivables........................................................ (289,276)
Related party receivables................................................ (19,596)
Prepaid expenses......................................................... (79)
Other assets............................................................. 4,464
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities........................... 87,511
Accrued payroll costs.................................................... (62,579)
Deferred income.......................................................... 80,969
Related party payables................................................... (197,758)
------------
Net cash used in operating activities................................. (18,638)
------------
Cash flows used in investing activities:
Capital expenditures.......................................................... (2,732)
------------
Net cash used in investing activities................................. (2,732)
------------
Cash flows from financing activities:
Proceeds on line of credit.................................................... 187,047
Distributions................................................................. (205,685)
Payments on related party notes receivable.................................... 37,200
------------
Net cash provided by financing activities............................. 18,562
------------
Decrease in cash................................................................ (2,808)
Cash at beginning of year....................................................... 11,912
------------
Cash at end of year............................................................. $ 9,104
==========
</TABLE>
See Notes to Financial Statements.
F-29
<PAGE> 77
PCS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
PCS Group, Inc. (the "Company") was formed in 1992 for the purpose of
providing contract and contract to hire services in the area of information
systems. The Company serves primarily the Louisville, Kentucky market area.
Furniture and equipment
Furniture and equipment are carried at cost, less accumulated depreciation.
Major additions are capitalized, while repairs and maintenance are charged to
expense as incurred. Depreciation is computed using accelerated methods over the
estimated useful lives of the assets.
Revenue recognition
Net service revenues consist of sales less credits and discounts. The
Company recognizes revenue for contract services based on hours worked by
assigned personnel on a weekly basis. Contract to hire services are recognized
based upon the successful completion of the assignment.
Major customers
The Company provided contract and contract to hire services of $1,472,470
in 1995 to three customers, representing approximately 41% of total service
revenues for 1995.
Income taxes
The Company elected to be taxed under the S Corporation provisions of the
Internal Revenue Code which provide for the taxable income of the Company to be
included in the income tax return of the individual shareholders. Accordingly,
there is no provision for income taxes included in the operating results for the
Company.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. The fair values of the Company's financial instruments are
estimated based on current market rates and instruments with the same risk and
maturities. The fair value of cash, accounts receivable, accounts payable and
line of credit approximate the carrying values of these financial instruments.
F-30
<PAGE> 78
PCS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. FURNITURE AND EQUIPMENT
Major classifications of furniture and equipment and related asset lives
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIFE 1995
----------- ------------
<S> <C> <C>
Furniture, fixtures and equipment.............................. 5 years $ 6,201
Computer equipment............................................. 3 years 57,977
Leasehold improvements......................................... 3 years 3,250
------------
67,428
Less accumulated depreciation.................................. 46,592
------------
$ 20,836
==========
</TABLE>
4. LINE OF CREDIT
The Company maintains a $250,000 bank line of credit agreement under which
$187,047 was outstanding at December 31, 1995. Interest on borrowings under the
agreement is 1.5% above the bank's base rate; 10% at December 31, 1995. The line
is secured by the Company's assets. The line was repaid in full on February 27,
1996 (see Note 8).
5. DISTRIBUTIONS TO SHAREHOLDERS
The Company distributed $205,685 to two stockholders in 1995, a portion of
which was to fund the stockholders' individual income tax liability related to
the S corporation taxable earnings (see Note 8).
6. COMMITMENTS AND CONTINGENCIES
Operating leases
Future minimum lease payments under operating leases for office space and
equipment are summarized as follows:
<TABLE>
<S> <C>
1996............................................................ $74,830
1997............................................................ 31,731
1998............................................................ 6,551
</TABLE>
Total rental expense for 1995 for all leases was $80,939, which is net of
amounts received under sub-leases with affiliates of $12,960.
Litigation
The Company and its shareholders have been sued by the former employer of a
shareholder/employee for alleged violations of various business contractual
relationships. The suit is in the discovery stage and if an unfavorable outcome
results, it is estimated that the range of loss could be $50,000 to $500,000
under the net profits method of damage estimation. In management's opinion, the
Company has sufficient legal defenses to prevent a judgment that would
materially affect its financial position.
F-31
<PAGE> 79
PCS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED PARTY TRANSACTIONS
The Company was party to certain transactions with companies affiliated
through common ownership. As of December 31, 1995 and for the year then ended,
the nature and amounts of these transactions are as follows:
<TABLE>
<S> <C>
Management fee expense..................................................... $18,968
Receivables................................................................ 19,296
Payables................................................................... 1,979
</TABLE>
8. SUBSEQUENT EVENT
On February 16, 1996, the Company completed the sale of the intangible
assets to Romac International, Inc. The sale price, including a non-compete
agreement, is in excess of book value of the assets acquired and is subject to
adjustment upon attainment of certain operating results. Subsequent to January
1, 1996, the Company made significant stockholder distributions approximately
$1,800,000. These distributions were a result of the sale described above and to
fund the stockholders' individual income tax liability.
F-32
<PAGE> 80
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors of
Strategic Outsourcing, Inc.
In my opinion, the accompanying balance sheets and the related statements
of income and retained earnings and of cash flows present fairly, in all
material respects, the financial position of Strategic Outsourcing, Inc. at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of Strategic Outsourcing Inc.'s management; my responsibility
is to express an opinion on these financial statements based on my audits. I
conducted my audits of these statements in accordance with generally accepted
auditing standards which require that I plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. I believe that my
audits provide a reasonable basis for the opinion expressed above.
Robert J. Dennehy
Medfield, Massachusetts
May 8, 1996
F-33
<PAGE> 81
STRATEGIC OUTSOURCING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 55,363 $ 77,317
Trade receivables, less allowance for doubtful accounts of $0 and
$6,000 in 1994 and 1995, respectively............................ 1,083,191 1,199,219
Prepaid expenses and other current assets........................... 3,750 14,640
---------- ----------
Total current assets........................................ 1,142,304 1,291,176
Furniture and equipment, net (Note 3)................................. 165,794 148,562
Other assets.......................................................... 11,425 11,425
---------- ----------
Total assets................................................ $1,319,523 $1,451,163
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities...................... $ 88,664 $ 77,276
Accrued payroll costs............................................... 135,156 102,140
Current taxes payable............................................... 456 7,000
Deferred income..................................................... 104,656 72,452
Current maturities of notes payable (Note 4)........................ 202,000 0
---------- ----------
Total current liabilities................................... 530,932 258,868
Commitments and contingencies (Note 6)
Stockholders' Equity:
Common stock, no par value; 15,000 shares authorized and 2,000
issued and outstanding........................................... -- --
Paid-in capital..................................................... 2,000 2,000
Retained earnings................................................... 786,591 1,190,295
---------- ----------
Total stockholders' equity.................................. 788,591 1,192,295
---------- ----------
Total liabilities and stockholders' equity.................. $1,319,523 $1,451,163
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 82
STRATEGIC OUTSOURCING, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED DECEMBER 31,
---------------------------
1994 1995
---------- ----------
<S> <C> <C>
Net service revenues.............................................. $5,737,968 $7,134,637
Direct costs of services.......................................... 2,630,941 3,538,338
---------- ----------
Gross profit.................................................... 3,107,027 3,596,299
Selling, general and administrative expenses...................... 2,633,550 3,115,000
Depreciation...................................................... 64,796 67,213
Other (income) expense............................................ 1,857 (1,907)
---------- ----------
Income before taxes............................................... 406,824 415,993
Provision for taxes............................................... 456 7,000
---------- ----------
Net income...................................................... $ 406,368 $ 408,993
========= =========
Retained earnings:
Beginning of year............................................... $ 512,748 $ 786,591
Less distributions.............................................. (132,525) (5,289)
---------- ----------
End of year..................................................... $ 786,591 $1,190,295
========= =========
Net income per share.............................................. $ 203.18 $ 204.50
========= =========
Weighted average shares outstanding (Note 1)...................... 2,000 2,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 83
STRATEGIC OUTSOURCING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 406,368 $ 408,993
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.................................................. 64,796 67,213
Provision for losses on accounts receivable................... -- 6,000
(Increase) decrease in operating assets:
Trade receivables............................................. (569,188) (122,028)
Prepaid expenses.............................................. 3,131 (10,890)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities................ (5,067) (11,388)
Accrued payroll costs......................................... 66,615 (33,016)
Deferred income............................................... 104,656 (32,204)
Current taxes payable......................................... -- 6,544
--------- ---------
Cash provided by operating activities.................... 71,311 279,224
Cash flows from investing activities:
Capital expenditures............................................. (99,087) (49,981)
--------- ---------
Cash used in investing activities........................ (99,087) (49,981)
Cash flows from financing activities:
Proceeds from note payable....................................... 202,000 --
Payments on note payable......................................... -- (202,000)
Repayment of stockholder loan.................................... (98,680) --
Distributions.................................................... (132,525) (5,289)
--------- ---------
Cash used in financing activities........................ (29,205) (207,289)
Increase (decrease) in cash........................................ (56,981) 21,954
Cash at beginning of year.......................................... 112,344 55,363
--------- ---------
Cash at end of year................................................ $ 55,363 $ 77,317
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest........................................... $ 1,916 $ 1,696
Cash paid for taxes.............................................. 456 456
</TABLE>
The accompanying notes are an integral part of these financial statements
F-36
<PAGE> 84
STRATEGIC OUTSOURCING
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Strategic Outsourcing, Inc. (the "Company") was formed in 1989 as a human
resources consulting firm that specializes in assisting companies in
implementing a wide variety of outsourcing, outplacement, and career planning
programs. The Company serves primarily the Northeast United States market area.
Furniture and Equipment
Furniture and equipment are carried at cost, less accumulated depreciation.
Major additions are capitalized, while repairs and maintenance are charged to
expense as incurred. Depreciation is computed using the modified accelerated
cost recovery method over the estimated useful lives of the assets.
Revenue Recognition
Net service revenues consist of sales less credits and discounts. The
Company recognizes revenue for Contract Services based on hours worked by
assigned personnel on a weekly basis. Outplacement services are billed for the
total fee for the program selected and recognized over the period services are
rendered. Deferred income reflects those outplacement services billed but not
rendered as of year end.
Major Customers
The Company provided human resources services of $1,253,246 and $958,543 in
1994 and 1995, respectively, to a customer representing approximately 22% and
13% of total service revenues for 1994 and 1995, respectively.
Income Taxes
The Company, with the consent of its shareholders, has elected to have its
income taxed under Section 1362 of the Internal Revenue Code. Under those
provisions, the Company is not taxed directly, for federal purposes for the
years ended December 31, 1994 and 1995. Instead, the taxable income of the
Company is included in the income tax return of the individual shareholders.
Accordingly, there is no federal provision for income taxes included in the
operating results of the Company.
Earnings Per Share
Earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. The fair values of the Company's financial instruments are
estimated based on current market rates and instruments with the same risk and
maturities.
F-37
<PAGE> 85
STRATEGIC OUTSOURCING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The fair values of cash, accounts receivable, accounts payable and current
portion of note payable approximate the carrying values of these financial
instruments.
3. FURNITURE AND EQUIPMENT
Major classifications of furniture and equipment and related asset lives
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
USEFUL LIFE 1994 1995
----------- --------- ---------
<S> <C> <C> <C>
Furniture, fixtures and equipment.................. 7 years $ 250,987 $ 255,973
Computer equipment................................. 5 years 149,763 194,758
--------- ---------
400,750 450,731
Less accumulated depreciation...................... (234,956) (302,169)
--------- ---------
$ 165,794 $ 148,562
========= =========
</TABLE>
4. LINE OF CREDIT
The Company maintains a $300,000 bank line of credit arrangement with the
Bank of Boston under which $202,000 was outstanding at December 31, 1994.
Amounts borrowed on the line bear interest at the prime rate plus 1.25% and is
secured by all business assets of the Company and personally guaranteed by the
stockholders. The use of this line generally is restricted to the extent that
the Company is required periodically to liquidate its indebtedness to the bank
for 30 days each year. Effective August 1995, the Company terminated its
agreement with the Bank of Boston and entered into a new one year facility in
the amount of $400,000 with Merrill Lynch. Amounts borrowed on the line bear
interest at the prime rate plus 1.0% and is secured by all of the business
assets of the Company and personally guaranteed by the stockholders.
Additionally, the Company is subject to various covenants under the line of
credit agreement.
At December 31, 1995 and 1994, the Company was in compliance with these
covenants. The line was terminated on March 4, 1996 (see Note 8).
5. DISTRIBUTIONS TO SHAREHOLDERS
The Company distributed $5,289 and $132,525 in 1994 and 1995, respectively,
to two stockholders in 1995, a portion of which was to fund the stockholders'
individual income tax liability related to the S corporation taxable earnings.
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
Future minimum lease payments under operating leases are summarized as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------------------- --------
<S> <C>
1996........................................................... $192,968
1997........................................................... 158,850
1998........................................................... 114,264
1999........................................................... 114,264
2000........................................................... 28,566
</TABLE>
7. RELATED PARTY TRANSACTION
During 1994, a stockholder loan in the amount of $98,680 was repaid to the
Company.
F-38
<PAGE> 86
STRATEGIC OUTSOURCING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. SUBSEQUENT EVENT
On March 4, 1996, the Company completed the sale of the intangible assets
and net fixed assets to Romac International, Inc. The sale price, including a
non-compete agreement, is in excess of net book value of the assets acquired and
is subject to adjustment upon attainment of certain operating results.
F-39
<PAGE> 87
(4/C PROCESS T/C)
COVER PAGE OF BROCHURE WITH FOUR PHOTOGRAPHS REPRESENTING EMPLOYEES OF THE
COMPANY.
EXAMPLE ADVERTISEMENT USED BY THE COMPANY.
<PAGE> 88
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS, OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 10
Use of Proceeds....................... 10
Dividend Policy....................... 10
Capitalization........................ 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 20
Management............................ 30
Certain Transactions.................. 34
Principal and Selling Shareholders.... 35
Description of Capital Stock.......... 36
Shares Eligible for Future Sale....... 37
Underwriting.......................... 38
Legal Matters......................... 39
Experts............................... 39
Additional Information................ 40
Index to Unaudited Pro Forma
Consolidated Financial Statements... P-1
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,640,000 SHARES
[ROMAC LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
ROBERT W. BAIRD & CO.
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. All such
fees and expenses shall be borne by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 19,106
NASD filing fee................................................................... 6,041
Nasdaq additional listing fee..................................................... 17,500*
Printing and engraving expenses................................................... 130,000*
Accounting fees and expenses...................................................... 100,000*
Legal fees and expenses........................................................... 142,500*
Blue Sky fees and expenses........................................................ 15,000*
Miscellaneous..................................................................... 69,853*
--------
Total................................................................... $500,000
========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Florida corporation. The Florida Business Corporation Act,
as amended (the "Florida Act"), provides that, in general, a business
corporation may indemnify any person who is or was a party to any proceeding
(other than an action by, or in the right of, the corporation) by reason of the
fact that he is or was a director or officer of the corporation, against
liability incurred in connection with such proceeding, including any appeal
thereof, provided certain standards are met, including that such officer or
director acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and provided further
that, with respect to any criminal action or proceeding, the officer or director
had no reasonable cause to believe his conduct was unlawful. In the case of
proceedings by or in the right of the corporation, the Florida Act provides
that, in general, a corporation may indemnify any person who was or is a party
to any such proceeding by reason of the fact that he is or was a director or
officer of the corporation against expenses and amounts paid in settlement
actually and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof, provided that such person acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, except that no indemnification shall
be made in respect of any claim as to which such person is adjudged liable
unless a court of competent jurisdiction determines upon application that such
person is fairly and reasonably entitled to indemnity. To the extent that any
officers or directors are successful on the merits or otherwise in the defense
of any of the proceedings described above, the Florida Act provides that the
corporation is required to indemnify such officers or directors against expenses
actually and reasonably incurred in connection therewith. However, the Florida
Act further provides that, in general, indemnification or advancement of
expenses shall not be made to or on behalf of any officer or director if a
judgment or other final adjudication establishes that his actions, or omissions
to act, were material to the cause of action so adjudicated and constitute: (i)
a violation of the criminal law, unless the director or officer had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe it
was unlawful; (ii) a transaction from which the director or officer derived an
improper personal benefit; (iii) in the case of a director, a circumstance under
which the director has voted for or assented to a distribution made in violation
of the Florida Act or the corporation's articles of incorporation; or (iv)
willful misconduct or a conscious disregard for the best interests of the
corporation in a proceeding by or in the right of the corporation to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
Article V of the Company's Bylaws provides that the Company shall indemnify any
director, officer, employee or agent or any former director, officer, employee
or agent to the full extent permitted by Florida law.
II-1
<PAGE> 90
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in Section of the
Underwriting Agreement (see Exhibit 1).
The Company has purchased insurance with respect to, among other things,
any liabilities that may arise under the statutory provisions referred to above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Effective August 31, 1994, the Company entered into separate Share Exchange
Agreements with the shareholders of (i) Romac and Associates, Inc., a
Massachusetts corporation, Romac & Associates of Boston, Inc., a Massachusetts
corporation, FMA International, Inc., a Florida corporation, Romac & Associates
of Tampa, Inc., a Florida corporation, FMA & Associates of Tampa, Inc., a
Florida corporation, Matthew James & Associates, Inc., a Florida corporation,
FMA Temporaries, Inc., a Florida corporation, FMA Temporaries of Rhode Island,
Inc., a Florida corporation, and FMA Consulting Services of Tampa, Inc., a
Florida corporation (collectively, the "Constituent Corporations"), and (ii)
Temporary Accounting Professionals, Inc., a Massachusetts corporation ("TAP").
In the share exchange with the shareholders of the Constituent Corporations, the
Company issued a total of 3,749,330 shares of its Common Stock to the
shareholders of the Constituent Corporations in exchange for all the shares of
common stock those shareholders owned in the Constituent Corporations. In the
share exchange with the shareholders of TAP, the Company issued a total of
188,359 shares of its Common Stock to the shareholders of TAP in exchange for
all the shares of outstanding common stock of TAP. As a result of these
transactions, each of the Constituent Corporations and TAP became a wholly-owned
subsidiary (directly or indirectly) of the Company, and the former shareholders
of the Constituent Corporations and TAP became shareholders of the Company.
The shares of Common Stock issued by the Company pursuant to the share
exchanges described above were exempt from registration under the Securities Act
of 1933 by virtue of Section 4(2) thereof and Rule 506, promulgated thereunder.
The shares were issued privately to a limited number of investors. The number of
investors, excluding accredited investors, was fewer than 35. All purchasers
were either (i) accredited investors, (ii) sophisticated investors with such
knowledge and experience in financial and business matters that they were
capable of evaluating the merits and risks of the prospective investment, or
(iii) represented by purchaser representatives who, together with the
purchasers, were capable of evaluating the merits and risk of the prospective
investment. A disclosure letter was delivered to all purchasers a reasonable
time prior to the transaction, and all purchasers were given an opportunity to
ask questions and receive answers from representatives of the Company. All
offerees were advised of the limitations on resale of the Common Stock and the
Company made reasonable inquiries to determine whether the purchasers were
acquiring the shares for themselves or with a view to distribution. Appropriate
restrictive legends were placed on all certificates representing shares of the
Common Stock issued in the share exchanges. No offers or sales were made by any
form of general advertising or solicitation. Pursuant to Rule 503, the requisite
number of copies of Form D were filed with the Securities and Exchange
Commission on September 14, 1994.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S> <C>
1 -- Form of Underwriting Agreement+
2.1 -- Asset Acquisition Agreement between Romac International, Inc. and Venture Networks
Corporation, Inc.**
2.2 -- Asset Acquisition Agreement between Romac International, Inc. and PCS Group, Inc.**
2.3 -- Asset Acquisition Agreement between Romac International, Inc. and Strategic
Outsourcing, Inc.**
3.1 -- Amended and Restated Articles of Incorporation*
3.2 -- Amended and Restated Bylaws*
</TABLE>
II-2
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S> <C>
4.1 -- Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit
3.1)*
4.2 -- Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2)*
4.3 -- Form of Stock Certificate*
5.0 -- Opinion of Holland & Knight+
10.1 -- Share Exchange Agreement, dated as of August 25, 1994, among the Company and the
shareholders of Romac and Associates, Inc., Romac & Associates of Boston, Inc., FMA
International, Inc., Romac and Associates of Tampa, Inc., FMA and Associates of
Tampa, Inc., Matthew James & Associates, Inc., FMA Temporaries, Inc., FMA
Temporaries of Rhode Island, Inc., and FMA Consulting Services of Tampa, Inc.
(collectively, the "Constituent Corporations")*
10.2 -- TAP Share Exchange Agreement, dated as of August 25, 1994, among the Company and the
shareholders of Temporary Accounting Professionals, Inc. ("TAP")*
10.3 -- Escrow Agreement, dated as of August 25, 1994, among the Company, the shareholders
of the Constituent Corporations, and NationsBank of Florida, N.A., as escrow agent*
10.4 -- TAP Escrow Agreement, dated as of August 31, 1994, among the Company, the
shareholders of TAP, and NationsBank of Florida, N.A., as escrow agent*
10.5 -- Shareholders' Agreement, dated as of August 31, 1994, among the Company, David L.
Dunkel, Howard W. Sutter, and Richard M. Cocchiaro, as controlling shareholders, and
certain other shareholders and holders of options to purchase shares of the
Company's Common Stock*
10.6 -- Stock Purchase Agreement, dated as of March 1, 1995, between the Company and Janene
Maddock, as the personal representative of the Estate of Richard Maddock, and form
of promissory note*
10.7 -- Romac International, Inc. Amended and Restated Incentive Stock Option Plan****
10.8 -- Form of stock option agreement*
10.9 -- Non-Employee Director Stock Option Plan*****
10.10 -- Form of Deferred Compensation Agreement between FMA International, Inc. and certain
of its officers*
10.11 -- Employment Agreement, dated as of January 1, 1995, between the Company and David L.
Dunkel, as amended on July 14, 1995*
10.12 -- Employment Agreement, dated as of January 1, 1995, between the Company and Howard W.
Sutter, as amended on July 14, 1995*
10.13 -- Employment Agreement, dated as of January 1, 1995, between the Company and Maureen
A. Rorech, as amended on July 14, 1995*
10.14 -- Employment Agreement, dated as of January 1, 1995, between the Company and Peter
Dominici, as amended on July 14, 1995*
10.15 -- Consulting Agreement dated October 27, 1995, between the Company and Corporate
Resource Development, Inc.
10.16 -- License Agreement, dated July 18, 1990, between Romac and Associates, Inc. and
McCloud Enterprises, Inc., as amended*
10.17 -- Franchise Agreement, dated January 31, 1985, between Romac and Associates, Inc. and
PS Group, Inc., as amended*
10.18 -- License Agreement, dated January 2, 1990, between Romac and Associates, Inc. and Bye
Enterprises, Inc., as amended*
10.19 -- Form of Franchise Agreement, dated July 17, 1989, between Romac and Associates, Inc.
and John R. McLaughlin and Steven A. Reiter, as amended*
</TABLE>
II-3
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S> <C>
10.20 -- Amendment No. 1 dated August 5, 1995 to Franchise Agreement between Romac and
Associates, Inc., and John R. McLaughlin, and Steven A. Reiter
10.21 -- Lease Agreement, dated January 8, 1991, between Hyde Park Place Ltd. II, as lessor,
and FMA International, Inc., as lessee*
10.22 -- Parking Agreement, dated April 13, 1995, between Hyde Park Place Ltd. II, as lessor
and the Company, as lessee
10.23 -- Lease Agreement, dated January 16, 1995, between the Company and Sun Microsystems
Finance*
10.24 -- Form of Master Finance Agreement between the Company and Informix Software, Inc.*
10.25 -- Promissory Note dated March 13, 1996, between the Company and NationsBank, N.A.
(South) and related guarantees and security agreements***
10.26 -- Form of Split Dollar and Cross-purchase Split Dollar Agreement
10.27 -- Registration Rights Agreement, dated as of August 31, 1994, among the Company and
certain shareholders of the Constituent Corporations and TAP*
10.28 -- Shareholder Registration Rights Agreement, dated as of September 5, 1994, among the
Company and certain shareholders of the Company*
21 -- Subsidiaries of the Registrant
23.1 -- Consent of Holland & Knight (to be contained in Exhibit 5)
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of Deming, Malone, Livesay & Ostroff, P.S.C.
23.4 -- Consent of Robert J. Dennehy, C.P.A.
24 -- Powers of Attorney (see power of attorney contained on page II-5)
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 33-91738).
** Incorporated by reference to the Company's Current Report on Form 8-K
(File No. 0-26058).
*** Incorporated by reference to the Company's Annual Report on Form 10-K
(File No. 0-26058).
**** Incorporated by reference to the Company's Registration Statement on Form
S-8 (File No. 33-97134).
***** Incorporated by reference to the Company's Proxy Statement on Schedule 14A
(File No. 0-26058).
+ To be filed by amendment
(b) Financial Statement Schedules
Consolidated financial statement schedule for the three years ended
December 31, 1994:
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
requested information is shown in the Financial Statements of the Registrant or
Notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
II-4
<PAGE> 93
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on the 9th day of May, 1996.
ROMAC INTERNATIONAL, INC.
By: /s/ DAVID L. DUNKEL
--------------------------------
David L. Dunkel,
President and Chief Executive
Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of Romac International, Inc.
(the "Company"), a Florida corporation, for himself and not for one another,
does hereby constitute and appoint David L. Dunkel, Maureen A. Rorech, and Peter
Dominici, and each and any of them and his substitutes, a true and lawful
attorney in his name, place and stead, in any and all capacities, to sign his
name to any and all amendments to this registration statement, including
post-effective amendments, and any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) of the Securities Act, and to cause the same to be filed
with the Securities and Exchange Commission, granting unto said attorneys and
each of them full power of substitution and full power and authority to do and
perform any act and thing necessary and proper to be done in the premises, as
fully to all intents and purposes as the undersigned could do if personally
present, and each of the undersigned for himself hereby ratifies and confirms
all that said attorneys or any one of them shall lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- -------------
<C> <S> <C>
/s/ DAVID L. DUNKEL President, Chief Executive May 9, 1996
- --------------------------------------------- Officer, and Director
David L. Dunkel (principal executive officer)
/s/ PETER DOMINICI Chief Financial Officer, May 9, 1996
- --------------------------------------------- Treasurer, and Director
Peter Dominici (principal financial and
accounting officer)
/s/ HOWARD W. SUTTER Director May 9, 1996
- ---------------------------------------------
Howard W. Sutter
/s/ MAUREEN A. RORECH Director May 9, 1996
- ---------------------------------------------
Maureen A. Rorech
/s/ GORDON TUNSTALL Director May 9, 1996
- ---------------------------------------------
Gordon Tunstall
/s/ WILLIAM R. CAREY, JR. Director May 9, 1996
- ---------------------------------------------
William R. Carey, Jr.
/s/ RICHARD M. COCCHIARO Director May 9, 1996
- ---------------------------------------------
Richard M. Cocchiaro
</TABLE>
II-6
<PAGE> 95
SCHEDULE II
ROMAC INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SUPPLEMENT SCHEDULE
<TABLE>
<CAPTION>
COLUMN C
-----------------------
COLUMN B ADDITIONS
--------------- ----------------------- COLUMN E
COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D -------------
- ------------------------------------ BEGINNING OF COSTS AND OTHER ---------- BALANCE AT
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ------------------------------------ --------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allowance Reserve................... 1993 $223,477 $162,649 $-- $ 84,326 $ 301,800
1994 $301,800 $215,362 $-- $184,262 $ 332,900
1995 $332,900 $376,201 $-- $ 85,951 $ 623,150
</TABLE>
<PAGE> 1
Exhibit 10.15
ROMAC INTERNATIONAL
PROJECT VISION
Corporate Resource Development, Inc. (CRD) proposes a consulting agreement with
ROMAC INTERNATIONAL (ROMAC) over the next 5-6 months with the following Scope
of Engagement. WHILE THE OUTCOMES WILL BE IDENTIFIED AND AGREED UPON IN PHASE
ONE OF THE PROJECT, THEY WILL INCLUDE BUT NOT BE LIMITED TO THE FOLLOWING:
- - Research and analysis to create, design and implement an operating
Trade Mark and/or Service Mark to brand identify ROMAC's consultative
client outcomes.
- - A Macro Branding strategy that will embrace the most sophisticated
value perception for ROMAC and create sustained competitive advantage in
their primary market place.
- - Micro branding strategies, consistent with the overall Macro Brand, for
each of the primary service lines - temporary, contract services, search,
and PSP - that fully elevate ROMAC's value added partner position.
- - A fully leveraged P.R.O.S. as a platform for expanded expertise,
client impact, and market place differentiation for the ROMAC outcomes
solution.
- - Research to determine target markets, target industries, and target
clients most likely to embrace increased performance rather than decreased
pricing as a basis for the ROMAC partnership concept.
- - Research to align ROMAC products and services with the compelling
agendas of strategic business management in their chosen target segments.
Construct performance models to communicate product, process and outcomes
relationships.
- - Consultative marketing and selling strategies and training designed to
focus the ROMAC national sales team toward the client strategic management
level, enabling them to effectively communicate the full impact and benefits
of the ROMAC partnership process.
- - Branch and salesperson marketing plans designed to maximize ROMAC brand
identity value, drive a high ROI from invested sales activity, and build
increasing profile and visibility for the sales force in their chosen target
markets.
- - A marketing intelligence process to continue to feed research and
information to branch sales people and share and communicate successes with
the ROMAC employees and their clients.
CRD will assign a lead consultant, with a support team to work in conjunction
with a selected ROMAC management team to execute the phases identified in this
scope of engagement.
CORPORATE RESOURCE DEVELOPMENT
INC.
<PAGE> 2
ROMAC INTERNATIONAL
SCOPE OF ENGAGEMENT
PHASE I: INTERNAL DISCOVERY & ASSESSMENT
PURPOSE:
- - To gain a better understanding of the competitive environment in which
ROMAC operates.
- - To evaluate the company's strengths and weaknesses, as well as, gauge
organizational receptivity to change and to implement competitive
strategies.
- - To understand market opportunities, issues, and perceptions from an
internal perspective.
- - To provide a framework for issues that need to be addressed in the
external market research phase.
ACTIVITIES:
- - CRD will conduct a detailed fact finding process through secondary
research to gain a better understanding of the competitive environment.
- - ROMAC personnel will be interviewed in group and individual
discussions.
- - Preliminary review of the sales and promotional material and public
relations programs for ROMAC.
DELIVERABLES:
- - ROMAC management debrief regarding the organizational assessment.
- - Interim recommendations concerning the sales and promotional material
and public relations programs.
TIME REQUIRED: 5 - 10 Days
PHASE II: MARKET POSITIONING ANALYSIS (MPA)
PURPOSE: To collect, integrate, and interpret market research information
regarding the following:
- - Prevailing agendas of prospective and existing client decision makers
relative to ROMAC's products and services.
- - Competitive positioning of current and potential competitors.
ACTIVITIES:
- - A CRD Senior Researcher conducts in-depth phone interviews with
prospective and existing ROMAC clients at various levels within those
organizations.
- - CRD and the ROMAC management team meet informally to review the
responses generated from the initial interviews.
- - Members of the CRD team assemble and analyze the information gathered in
the in-depth interviews.
- - Members of the CRD Project team will meet with ROMAC management to
formally discuss the findings and develop conclusions from the Market
Positioning Analysis.
2
CORPORATE RESOURCE DEVELOPMENT
INC.
<PAGE> 3
DELIVERABLES:
- - Mid-point (Informal) Documented Research Report. CRD prepares an
informal summary document that encompasses the respondents' verbatim
comments from the initial interviews.
- - Market Positioning Research Analysis Document. The research
information is assembled both quantitatively and qualitatively in a
single document.
PHASE II(a): AGENDA BASED SALES TRAINING
PURPOSE: To initiate a transition for the ROMAC management team and selected
sales personnel towards the implementation of agenda based selling techniques.
THIS PHASE WILL BE DONE AS PART OF AND IN THE SAME TIME FRAME WITH THE MARKET
POSITIONING ANALYSIS. This insures more immediate impact for ROMAC and a more
effective implementation of the Brand Identity Strategy into the overall
selling process.
ACTIVITIES:
- - A training session for the ROMAC Senior Management and Branch
Management which focuses on the tactical execution of agenda based
selling including, but not limited to:
- Research techniques
- Positioning tactics
- Access techniques
- Sales control methodologies
- - A separate agenda based sales training session for selected ROMAC
sales personnel which focuses on the same techniques, tactics and
methodologies required in the successful execution of agenda based
selling.
DELIVERABLES: Training execution document.
TIME REQUIRED: 40 - 50 Days
PHASE III: DIFFERENTIATION STRATEGY DEVELOPMENT
PURPOSE: To develop specific market-oriented strategies and tactical methods
that will serve to differentiate ROMAC in the market place including the
development of a new ROMAC trade mark and/or service mark.
ACTIVITIES:
- - CRD will conduct an interactive strategy session with the ROMAC
management team to develop the opportunities and actions that address
the conclusions derived from the Market Positioning Analysis.
- - CRD project team will formulate a Macro strategy based on the
acceptable opportunities and actions.
- - CRD project team will develop Micro strategies that address the
prospective and existing market base.
- - CRD project team, in conjunction with the ROMAC management team, will
identify target clients.
3
CORPORATE RESOURCE DEVELOPMENT
INC.
<PAGE> 4
- - Descriptive "Positioning" statements and performance models are
created to describe ROMAC's new positioning strategy and serve as the
basis for development of ROMAC's trade mark and/or service mark.
DELIVERABLES:
- - Documented Brand Identity Strategy with an execution process.
- - Market-ready Positioning statements and performance models.
- - Trade Mark and/or Service Mark.
TIME REQUIRED: 25 - 35 Days
PHASE IV: STRATEGIC IMPLEMENTATION
PURPOSE: To initiate a transition for the ROMAC management team and the
selected sales personnel towards the implementation of the Brand Identity and
Trade Mark and/or Service Mark Strategy into the agenda based marketing and
selling process.
ACTIVITIES:
- - A training and orientation session with selected ROMAC personnel to
provide an understanding of the techniques and procedures required to
execute the Brand Identity Strategy.
- - A training session with the ROMAC Senior Management and Branch
Management which focuses on the tactical execution of the Brand
Identity Strategy. This session will include a detailed review of the
Brand Identity Strategy and its incorporation into the agenda based
selling process.
- - A separate training session with the selected sales personnel, which
also focuses on the tactical execution of the Brand Identity Strategy.
DELIVERABLES: Training and market strategy execution document.
TIME REQUIRED: 30-40 Days
PHASE V: STRATEGIC EVALUATION & GUIDANCE
PURPOSE: To objectively evaluate the progress of ROMAC in the execution of the
Brand Identity strategy and offer recommendations as to corrections or future
refinements.
ACTIVITIES:
- - Establish and train internal resources to serve as market intelligence
to guide and support the continual efforts in the area of market
development.
- - Consulting meetings at your location to review actions, plans and
outcomes.
- - Telephone consulting for key account assistance.
DELIVERABLES: Strategic evaluations and recommendations for future actions.
TIME REQUIRED: 180 - 290 Days
4
CORPORATE RESOURCE DEVELOPMENT
INC.
<PAGE> 5
PROJECT FEES
After careful consideration of the scope of effort and variables involved in
this project, we believe the following pricing structure to be appropriate:
<TABLE>
<S> <C> <C> <C>
TOTAL FEE: $200,000
Initial payment: Oct. 26, 1995 $50,000
Monthly Payments:
Jan. 1, 1996 $30,000
Feb. 1, 1996 $30,000
Mar. 1, 1996 $30,000
Apr. 1, 1996 $30,000
May 1, 1996 $30,000
</TABLE>
ESTIMATED PROJECT DURATION
<TABLE>
<S> <C>
Phase I 5 - 10 Days
Phase II 40 - 50 Days
Phase III 25 - 35 Days
Phase IV 30 - 40 Days
Phase V 180 - 290 Days
- ----------------------------
TOTAL 280 - 425 Days
</TABLE>
Unless subsequent arrangements are made, CRD will invoice any travel and lodging
expenses incurred by CRD project personnel in the execution of the consulting
engagement. Invoices will be billed at cost.
CRD reserves the right to make changes mutually agreed upon with ROMAC, to the
approach and subject content utilized in this engagement, based upon knowledge
and information gained during the engagement.
5
CORPORATE RESOURCE DEVELOPMENT
INC.
<PAGE> 6
SERVICES CONTRACT
Client : ROMAC INTERNATIONAL
Address: 120 West Hyde Park Place, Suite 200 Tampa, FL 33606
Contact: David Dunkel, President Telephone: 813-258-8855
Date: October 26, 1995
SERVICES TO BE PROVIDED
- --------------------------------------------------------------------------------
Type of Service: Brand Identity and Trade Mark/Service Mark Development
Strategy
Dates of Service: Per Scope of Engagement & Document of Understanding
Contact: W.R. 'Max' Carey, Jr.
Consultant: Chuck Murchison and Philip Hayden
BILLING ARRANGEMENTS
- --------------------------------------------------------------------------------
BRAND IDENTITY AND TRADE MARK/SERVICE MARK
DEVELOPMENT STRATEGY $200,000.00
<TABLE>
<S> <C> <C>
Initial Payment: Oct. 26, 1995 $50,000.00
- ---------------
Monthly Payments: Jan. 1, 1996 $30,000.00
- ---------------- Feb. 1, 1996 $30,000.00
Mar. 1, 1996 $30,000.00
Apr. 1, 1996 $30,000.00
May 1, 1996 $30,000.00
</TABLE>
Checks are to be made payable to: CORPORATE RESOURCE DEVELOPMENT, INC.
700 GALLERIA PARKWAY, SUITE 450
ATLANTA, GEORGIA 30339
770-953-8016
EXPENSE ARRANGEMENTS
- --------------------------------------------------------------------------------
Travel, dining and lodging expenses to be paid by ROMAC International as
required. All expenses are billed at cost.
/s/ W.R. Carey, Jr. /s/ Peter Dominici
- ------------------------------------ ------------------------------------
Corporate Resource Development, Inc. ROMAC International
10/27/95 10/27/95
- ------------------------------------ ------------------------------------
Date Date
Please sign and return one copy to us.
CORPORATE RESOURCE DEVELOPMENT
INC.
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 1 TO AGREEMENT BETWEEN
ROMAC AND ASSOCIATES, INC.
BAYSHARE, INC., FRANCHISEE
WHEREAS, Romac and Associates, Inc. (sometimes called the "Corporation")
and John R. McLaughlin and Steven A. Reiter, as Franchisee, entered into an
Agreement dated July 17, 1989, which Agreement was assigned to and assumed by
Bayshare Inc. (the "Licensee") on January 1, 1991; and
WHEREAS, the parties desire to amend the Agreement on the terms and
conditions contained herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. The address of the Corporation is hereby changed to 120 West Hyde Park
Place, Suite 200, Tampa, Florida 33606.
2. Paragraph 1(i) of the Agreement is hereby amended in its entirety to
provide as follows:
"Direct Payroll Costs" means taxes measured by sales, gross receipts
or Temp Employee wages, the employer's share of federal social security
taxes, federal and state unemployment taxes and contributions, worker's
compensation, insurance premiums, disability insurance premiums when
required by law, taxes on union, health and welfare payments and any
insurance premiums based upon payrolls which may be levied; all with
respect to Wages or Gross Billings developed hereunder.
3. Paragraph 1(j) of the Agreement is hereby amended in its entirety to
provide as follows:
(j) "Field" shall mean both Data Processing and Financial Services.
4. Paragraph 1(q) is hereby amended in its entirety to provide as follows:
"Romac Temp Fee" means:
<PAGE> 2
For the calendar year commencing January 1, 1995 and each year
thereafter, 3-3/4% of Temp Adjusted Billings.
In the event that Licensee elects to provide its own Backroom Services on or
after January 1, 1995 in accordance with Paragraph 35 of this Amendment No. 1
with respect to Financial Services and Data Processing, then, notwithstanding
the foregoing, Romac Temp Fee shall mean, with respect to the activity to which
it provides Backroom Services only, 1% of Temp Adjusted Billings attributable
to such activity from and after the date Licensee begins to provide its own
Backroom Services.
5. Paragraph 1(s) is hereby amended in its entirety to provide as follows:
"Temp Employees" means the temporary personnel performing services for
Customers obtained by Licensee, which Temp Employee, upon commencement of
performing services for a Customer, shall be an employee of the Corporation
unless the Licensee has elected to provide its own Backroom Services.
6. A new Paragraph 1(w) is hereby added to provide as follows:
"Backroom Services" means the maintenance of or access to a staff of
necessary personnel and systems to issue temporary funding as well as Direct
Payroll Costs, to bill customers and to process, administer and collect
accounts receivables represented by such billings. It also includes provision
of the working capital or financing necessary to carry Wages and Direct Payroll
Costs and expenses of temporary personnel and royalties and other payments due
to the Corporation hereunder until billing and collection of outstanding
accounts receivables.
7. A new Paragraph 1(x) is hereby added as follows:
(x) "Cafeteria Services" means those services described on Exhibit A
attached to the Agreement and incorporated therein by this reference. The
Corporation shall be entitled to change or discontinue any such Services, in
its sole discretion, at any time upon sixty (60) days' prior notice to the
Licensee.
8. A new Paragraph 1(y) is hereby added as follows:
(y) "Cafeteria Services Fees" means those fees for Cafeteria Services
described on Exhibit A attached to the Agreement. The Corporation shall be
entitled to change any of such
2
<PAGE> 3
Fees, in its sole discretion, at any time upon sixty (60) days' prior notice to
the Licensee.
9. Paragraph 2(a) is hereby amended in its entirety to provide as follows:
(a) The Corporation hereby grants to Licensee the right to use the mark
ROMAC(C) and the right, authorization and privilege to use ROMAC systems and
techniques in the operation of a Full Service Office serving primarily the
Field at one or more locations approved by the Corporation in the Area,
including 180 Montgomery Street, San Francisco, CA subject to this Agreement.
10. The first sentence of the last paragraph at the bottom of page 5,
being a part of Section 3, is amended by adding at the end of such sentence the
following:
"except upon the acquisition by a third party of the Corporation, of all or
substantially all of the Corporation's assets, including this Agreement, or the
Corporation's rights under this Agreement, and in such event provided that any
such permanent and/or temporary personnel service business shall not be
conducted at a location in the Area servicing the Field under the mark
'Romac'."
11. The second paragraph of Paragraph 7(f) on page 10 of the Agreement which
commences "Since Licensee is licensed pursuant to Paragraph 2(a) . . . ." is
deleted in its entirety.
12. The first line of Paragraph 8(d) is hereby amended in its entirety to
provide as follows:
(d) For so long as the Corporation is providing Backroom Services, the
Licensee agrees with respect to such activity:
13. Paragraph 8(e) is hereby amended in its entirety to provide as follows:
(e) so long as the Corporation is providing Backroom Services, Licensee
agrees that all Temp Employees connected with that activity, upon commencement
of performing service for a Customer, are employees of the Corporation or its
subsidiaries for all purposes when such work is rendered in the name of the
mark(s) licensed hereunder.
3
<PAGE> 4
14. Paragraph 12(a) concerning royalties due on Permanent Placement
activities is hereby deleted in its entirety.
15. So long as Franchisee expends, for generic advertising or public
relations promoting conspicuously the ROMAC name, an amount at least equal to
that otherwise due under Paragraph 12(b), compliance with Paragraph 12(b) is
hereby waived. Franchisee shall forward to the Company on a quarterly basis an
accounting analysis with supporting documentation. Expenditures for specific
classified advertising do not qualify as generic advertising for purposes of
this Paragraph. Franchisee shall comply with Sub-Paragrpah 4(f)(iv) with
respect to all sales or promotional materials and advertising.
16. Paragraph 13(e) is hereby deleted in its entirety.
17. A new paragraph 14(i) is hereby added as follows:
(i) The Corporation shall provide the Licensee with those Cafeteria
Services elected by the Licensee in accordance with procedures established by
the Corporation from time to time in exchange for payment by the Licensee of
the corresponding Cafeteria Services Fees.
18. The first two sentences of Paragraph 15(d) are hereby amended in their
entirety to provide as follows:
(d) The Corporation shall be the employer of Temp Employees for
Customers obtained or serviced by Licensee in connection with Licensee's
activity in Financial Services and Data Processing to the extent the
Corporation provides Backroom Services with respect to such activity and shall
pay and finance the payroll for such Temp Employees. For so long as the
Corporation is providing Backroom Services with respect to the Licensee's
activity in Financial Services and Data Processing, the Corporation agrees
with respect to such activity:
19. The first sentence of Paragraph 16 is hereby amended in its entirety to
provide as follows:
Subject to the right of either party to terminate as provided in
Sections 17 and 18, the term of this Agreement shall be for the period
commencing August 11, 1989, being the date the Licensee completed the
initial training under Paragraph 14(g) of this Agreement, and ending
on the close of business on December 31, 1999.
The remainder of Paragraph 16 is deleted.
4
<PAGE> 5
20. A new paragraph 17(c) is hereby added as follows:
(d) Provided that it is not then in default under this Agreement, the
Corporation shall have the right to terminate this Agreement by purchasing all
of the Licensee's assets, including goodwill, used in the ordinary course of
the Licensee's operations hereunder (hereinafter the "Included Assets") and
assuming all of the Licensee's current operating liabilities incurred in the
ordinary course of such operations (hereinafter the "Included Liabilities"),
in accordance with this Paragraph 17(c) and Paragraph 19(g). In order to assist
the Corporation in its determination, Licensee shall forward to the Corporation
promptly on the Corporation's request Licensee's financial statements, whether
audited or unaudited, and any supporting information. The Corporation's right
to terminate the Agreement under this Paragraph 17(c) may be exercised by
written notice to the Licensee given at any time after December 31, 1995 and
before January 1, 2000 (hereinafter the "Option Period"), but not later than
ninety (90) days after the Corporation's receipt of the Licensee's exercise of
its own right to terminate this Agreement pursuant to Paragraph 18(b), and
shall, if properly exercised in accordance herewith, take precedence over such
termination right of the Licensee, or right of Licensee or its shareholder, to
transfer under Section 21 of the Agreement, notwithstanding any other provision
contained in the Agreement.
21. The language under Section 18 is hereby designated Paragraph 18(a) and
new Paragraph 18(b) is hereby added as follows:
(b) Subject to the Corporation's right to terminate this Agreement set
forth in Paragraph 17(c), and provided that the Licensee is not then in default
under this Agreement, the Licensee shall have the right to terminate this
Agreement by paying the amount (the "Exit Price") set forth in, and otherwise
complying with, Paragraph 19(h). Such right to terminate may be exercised by
written notice to the Corporation given at any time during the Option Period.
22. Paragraph 19(a) is hereby amended to insert the following language at
the beginning of the first sentence thereof:
"Except as provided in Paragraph 19(h),"
23. Paragraph 19(b) is hereby amended to insert the following language at
the beginning thereof:
"Provided that the termination of the Agreement is other than
expiration (including compliance by Licensee with Paragraph
5
<PAGE> 6
19(h)) or termination by Licensee pursuant to Section 18(a) or (b),"
24. Paragraph 19(d) is hereby amended to insert the following language
after the word "and" at the end of the third line thereof:
", provided that the termination of the Agreement is other than
expiration (including compliance by Licensee with Paragraph 19(h)) or
termination by Licensee pursuant to Section 18(a) or (b),"
25. The second sentence of Paragraph 19(e) on page 24 of the Agreement
is deleted in its entirety.
26. Paragraph 19(f) is hereby amended in its entirety to provide as
follows:
(f) The Licensee further agrees that upon termination or expiration of
the Agreement, the Licensee will take all such action as may be required to
cancel any assumed name or equivalent registrations relating to his use of any
Proprietary Mark. Provided that the termination of the Agreement is other than
expiration (including compliance by Licensee with Paragraph 19(h)) or
termination by the Licensee pursuant to Paragraph 18(a) or (b), the Licensee
further agrees to notify the telephone company and all listing agencies of the
termination of his right to use any telephone number and any classified and
other telephone directory listings associated with any Proprietary Mark and with
the office and to authorize transfer of same to the Corporation. The Licensee
hereby appoints the Corporation his attorney in fact, to direct the telephone
company and all listing agencies to transfer such items to the Corporation under
such circumstances should the Licensee fail or refuse to do so, and the
telephone company and all listing agencies may accept such direction as
conclusive of the Corporation's right to direct their transfer.
27. A new Paragraph 19(g) is hereby added as follows:
(g) In the event that the Corporation properly exercises its
right to terminate the Agreement pursuant to Paragraph 17(c), the purchase
price shall equal five times the Licensee's pre-tax operating earnings for the
last complete twelve (12) calendar months prior to the date of the Licensee's
receipt of the Corporation's notice of exercise of such right, minus the total
of $400,000 plus fifteen percent (15%) per annum, compounded annually, for the
period that shall have elapsed from January 1, 1995 until the Licensee's
receipt of such notice of exercise. In calculating such purchase price, the
Licensee's pre-tax operating earnings
6
<PAGE> 7
shall be increased by all royalties paid to the Corporation hereunder, total
compensation paid to the Licensee's principals, John R. McLaughlin and Steven
A. Reiter or their successors (the "Principals"), in excess of $200,000 in the
aggregate (as from time to time reasonably adjusted for inflation), and all
extraordinary expenses incurred, as mutually agreed between the parties, and
will be modified to reflect all financial statement adjustments as are
necessary or appropriate, in the reasonable judgment of the Corporation and its
auditors, and in accordance with generally accepted accounting principles, in
each case during the applicable twelve-month period. In the event Licensee's
accountant disagrees with a proposed adjustment, a contingent reserve or escrow
amount satisfactory to the Corporation's auditor shall be arranged.
Notwithstanding the foregoing, but only if the Licensee shall receive the
Corporation's notice of exercise of the Corporation's right to terminate the
Agreement prior to the Corporation's receipt of the Licensee's notice of
exercise of its own right to terminate the Agreement under Paragraph 18(b), the
purchase price, in excess of Included Liabilities, shall be not less than
$3,000,000.
The purchase price, net of Included Liabilities, shall be paid in cash and/or
readily marketable securities in full at the Closing of the purchase, which
shall take place on the ninetieth day after the Licensee's receipt of the
Corporation's notice of exercise and at which time the Agreement shall
terminate. As a condition of such closing, each of the Principals shall, if
requested by the Corporation, (i) agree to continue in the operation of the
Licensee's business for a maximum of twelve (12) months following the closing
at a minimum compensation equal to $100,000 per annum, (ii) continue to honor
the restrictions imposed by Section 20 of the Agreement, and (iii) provide
customary representations, warranties and indemnities reasonably satisfactory
to counsel to the Corporation.
Consummation of the purchase of Included Assets and assumption of Included
Liabilities will be subject to satisfaction or waiver by the Corporation of
various conditions precedent including (without limitation) the following:
(i) Due Diligence. After execution of customary non-disclosure and
confidentiality agreements, the Corporation and its representatives will have
completed to their satisfaction such physical plant inspections and such
financial and business audits and inspections of the Licensee, and shall have
received such financial and business information concerning the Licensee as
they consider necessary, and their findings (including without limitation their
findings of the financial condition, earnings, operations, prospects,
contracts, and commitments of the Licensee) shall be satisfactory to the
Corporation in its reasonable discretion.
7
<PAGE> 8
(ii) No Adverse Change. There shall have been no material
adverse change in the financial condition or results of operations of the
Licensee from that reflected on, and no material financial statement
adjustments will be proposed to, the balance sheets and income statements on
which the computation of the purchase price is based.
(iii) No Litigation. There shall be no effective injunction,
writ or preliminary restraining order of any nature issued by a court or
governmental agency of competent jurisdiction restraining or prohibiting the
consummation or implementation of the acquisition and no proceeding or lawsuit
shall have been commenced and be pending or threatened by any governmental or
regulatory agency, or any other person with respect to the acquisition that the
Corporation in good faith and with the advice of counsel, believes (i) is
likely to result in any of the foregoing or (ii) may result in the payment of
substantial damages by the Corporation or the Licensee.
(iv) Consents. The Licensee and Corporation shall have
obtained such consents, approvals, and assurances as are necessary or
advisable in the opinion of the Corporation, including (without limitation)
approvals of applicable regulatory bodies, the Licensee's lenders, the
Licensee's landlords, and other parties to material contracts of the Licensee
or the Corporation.
After the date of notice, the Corporation and its representatives may
have unrestricted access during regular business hours to the business books
and records of the Licensee and may make such examinations of them and extracts
from them and conduct such other investigations as the Corporation or its
representatives consider appropriate to determine the condition (financial or
otherwise) of the Licensee.
28. A new Paragraph 19(h) is hereby added as follows:
(h) In the event that the Licensee properly exercises its
right to terminate the Agreement in accordance with Paragraph 18(b), or upon
expiration of the Agreement on December 31, 1999, the Licensee shall pay the
Exit Price to the Corporation as follows: $400,000 plus 15% per annum,
compounded annually, for the period commencing on January 1, 1995, through the
Corporation's receipt of such notice of exercise, payable one-half (1/2) upon
termination or expiration, and the balance in twelve (12) equal consecutive
monthly installments of principal and interest (with interest accruing on the
unpaid balance at Bank of America's prime rate in effect on the date of
termination or expiration from such date until the balance is paid in full),
beginning one month after termination or expiration. Such obligation shall be
evidenced by a negotiable promissory note in form and substance reasonably
satisfactory to the Corporation's counsel and guaranteed, jointly
8
<PAGE> 9
and severally, by Mr. Reiter and Mr. McLaughlin. Such note shall be secured by
a security interest in all of the assets of the Franchisee. If the Licensee
terminates the Agreement in accordance herewith, the first installment of the
Exit Price shall be paid on the tenth day after the Corporation's receipt of
the Licensee's notice of exercise of its right to terminate. If the Agreement
expires, such installment shall be paid on December 31, 1999. In either case
the Agreement shall terminate on the date of such payment. Upon termination or
expiration of the Agreement in accordance with this Paragraph 19(h), and
notwithstanding any other provision herein, the Licensee shall retain all the
assets and goodwill of its ROMAC business and continue its prior ROMAC
operations under a different tradename without restriction; provided, however,
that the Licensee shall comply in full with the applicable portion of Paragraph
19(d) and shall be entitled thereafter to use the ROMAC name in its advertising
only to announce the transition of its ROMAC business to another tradename for
one week after termination or expiration; and, provided, further, that the
Corporation shall be prohibited from competing with the Licensee under any
tradename, including the ROMAC name, in the Licensee's Area for four (4) months
after termination or expiration.
29. The introductory language of Paragraph 20(a) on page 24 is hereby
amended in its entirety as follows:
"(a) So long as this Agreement or any extension hereof is in effect
and for a period of two (2) years after its termination for any reason other
than for expiration or termination by Licensee pursuant to Section 18(a) or (b),
Licensee (and its principal partners, officers, or shareholders if Licensee is
a partnership or corporation, respectively) shall not: . . ."
The remainder of the first sentence of Paragraph 21(a) commencing with the
words "(i) divert, or attempt to divert" and ending with the words "within the
Area." shall continue in full force and effect.
30. Subparagraph 21(b)(ii)(3) is hereby amended in its entirety to provide
as follows:
"(3) If the transfer, other than such transfer as is authorized under
Subparagraph 21(b)(ii)(1) of this Agreement, would not have the effect of
transferring control of the operation to someone other than one of the original
signatories of the Agreement, as set forth in Subparagraph 21(b)(ii)(1), then
the Corporation (upon written notice of transfer) shall consent to the transfer
without condition."
9
<PAGE> 10
31. Subparagraph 22(a)(i) is hereby amended in its entirety to provide
as follows:
(i) Apply to the Corporation for the right to continue the
franchise (for the duration of the term of this Agreement), which right shall
be granted upon the fulfillment of all of the conditions set forth in
Subparagraph 21(b)(ii)(2) of this Agreement (except that no transfer fee shall
be required and no change shall be made in the current form of this Agreement);
32. Subparagraph 22(a)(iii) is hereby amended in it entirety to
provide as follows:
"(iii) If as a result of the death or disability of a shareholder
of the Licensee all of the disabled or deceased party's interest in the
Licensee is transferred to any of the remaining shareholders or to the
Licensee, if it is a corporation, and as a result of such transaction the
surviving signatory of the Agreement (to wit, either John R. McLaughlin or
Steven A. Reiter) remains in control of the Licensee, then upon written notice
to the Corporation, the Corporation shall consent to the continued operation of
the franchise pursuant to the terms of this Agreement."
33. Section 24 is hereby amended in its entirety to provide as follows:
24. NOTICES
All notices required or permitted to be given hereunder shall be
in writing and shall be transmitted by personal delivery, by recognized
overnight carrier or via deposit in the United States mails, registered or
certified, postage prepaid, addressed to the Corporation or the Licensee, as
the case may be, at the address set forth at the head of this Agreement, or to
such other addresses as the parties may direct by notice given as hereinabove
provided. Every such notice shall be deemed given when received by the
addressee.
34. Section 28 of the Agreement is hereby amended in its entirety to
provide as follows:
28. FORCE MAJEURE
A party shall not be liable or responsible in any manner to the
other for failure to perform or delay in performance of the terms of this
Agreement when such failure or delay is due to either the direct or indirect
result of strikes or other labor troubles, fires, floods, materials or labor
shortage, equipment
10
<PAGE> 11
failure, postal mailing delay, embargoes, stoppages in transit, acts,
regulations, or orders of government, war, sabotage, acts of God or public
enemy, or other similar causes beyond the reasonable control of the
non-performing party. The non-performing party shall act promptly upon the
occurrence of such an event to cure the cause of delay of performance and shall
proceed diligently until such delay or failure to perform is cured.
35. Notwithstanding anything to the contrary contained in the
Agreement, the Corporation agrees that Licensee shall have the option, as soon
as is reasonably practicable after written notice to the Corporation, to
procure Backroom Services from a third party or to provide the Backroom
Services to itself with respect to both Financial Services and Data Processing
but not to either Field separately. The date of effectiveness of the exercise
of this option is called the "Option Effective Date." The Licensee's option
hereunder shall be subject to the following:
a) The notice of exercise of this option shall indicate whether
Licensee proposes to obtain Backroom Services from a third party or to provide
such services for itself. Such notice shall provide such information concerning
the capacity and experience of the third party or Licensee, as the case may be,
to provide the Backroom Services and the method and manner in which such
services are to be provided as may reasonably be required by the Corporation to
determine that the Backroom Services required to be provided under the
Agreement can be effectively and fully performed and to assure Licensee's
compliance with its obligations thereunder. If Licensee obtains such Backroom
Services from a third party, Licensee shall obtain and furnish to the
Corporation the agreement of such third party to remit directly to the
Corporation the Romac Temp Fee together with a copy of all reports to be
furnished had the Corporation continued to perform the Backroom Services. Such
agreement, and the qualifications of such third party or the Licensee to
perform the Backroom Services, shall be to the reasonable satisfaction of the
Corporation and approval will not be unreasonably withheld.
b) From and after the Option Effective Date, the Corporation shall
have no further obligation to provide the Backroom Services and the provisions
of Paragraph 8(e), 8(d), 13(a), (b) and (c), 15(d) and 15(e) of the Agreement
shall have no further force and effect except as they may apply after such date
to activities conducted prior to such date. Licensee on and at all times after
the Option Effective Date, shall maintain worker's compensation insurance and
fidelity bond and employee's errors and omission insurance as specified in
Paragraph 15(e) in amounts equal to that carried by the Corporation prior to
the Option Exercise Date, which insurance (except workers compensation
insurance) shall name the Corporation as an additional insured and the
Corporation shall be relieved of any requirement therefor.
11
<PAGE> 12
(c) Upon the Option Effective Date, unless other arrangements can be
negotiated with the Corporation's lender which cannot be guaranteed, Licensee
shall purchase from the Corporation and the Corporation shall assign without
recourse all then uncollected accounts which arose under the Agreement through
the Option Effective Date. From and after the Option Effective Date, Licensee
shall have the obligation and responsibility to perform for itself or procure
from an approved third party all of the Backroom Services previously performed
by the Corporation and the party performing such Backroom Services shall remit
the full amount of the Romac Temp Fee to the Corporation no later than the
twentieth day of every Accounting Period with respect to Temp Adjusted Billings
during the immediately preceding Accounting Period.
(d) The Licensee shall provide to the Corporation, together with the
payment of all sums due during each Accounting Period of the Term, a royalty
statement showing Temp Gross Billings, Temp Adjusted Billings, Wages, Direct
Payroll Costs, and the Romac Temp Fee applicable to each such Accounting Period.
The form of such statement shall be at least as detailed as the statement
otherwise required to be provided to the Licensee pursuant to the Agreement had
the Corporation continued to perform such Backroom Services.
(e) If the Licensee exercises its option, it shall provide to or
obtain for the Corporation the right to inspect the books, records, files, and
operating procedures of the third party providing such Backroom Services or its
own books, records, files, and operating procedures to enable the Corporation
to determine that the provision of Backroom Services and the accuracy of all
reports concerning the payment of sums due the Corporation are in compliance
with the Licensee's obligations under the Agreement. All such books, records,
files, and operating procedures shall be maintained for a period of 5 years,
regardless of termination or expiration of the Agreement.
36. Exhibit B is hereby amended by the addition of Marin, Contra Costa
and Santa Clara counties; provided, however, that if Licensee shall not have
opened a branch office in Santa Clara county within 36 months from the date of
this Amendment (which office shall be staffed by a full-time marketing and a
full-time staffing consultant), then on written notice the Corporation may
terminate Santa Clara county from Licensee's Primary Area of responsibility.
37. All other terms, conditions and provisions of the Agreement shall
continue in full force and effect without modification or change.
-12-
<PAGE> 13
38. Licensee acknowledges that, to the best of its knowledge, Romac
and Associates, Inc. is in full compliance with the terms of the Agreement as
of the date hereof and that as of the said date the Licensee has no claims,
offsets, or defenses against Romac and Associates, Inc., its officers,
directors, agents or representatives, in law or in equity, arising under or
pertaining to such Agreement except for Licensee's Share of Temp Adjusted
Billings for the current Accounting Period which are accruing under the
Agreement in the ordinary course and are not yet payable or paid, as to which
all rights are reserved. Romac and Associates, Inc. acknowledges that, to the
best of its knowledge, the Licensee is in full compliance with the terms of the
Agreement as of the date hereof and that as of said date Romac and Associates,
Inc. has no claims, offsets, or defenses against Licensee, its officers,
directors, agents or representatives, in law or in equity, arising under or
pertaining to such Agreement except claims for royalties and fees accruing in
the ordinary course under the Agreement and not yet payable or paid, as to
which all rights are reserved.
39. In order to insure to the Corporation the benefits of this
Amendment, Licensee shall use its best efforts to obtain from any secured
lender such lender's agreement (i) to provide to the Corporation a copy of any
notice of default given to Licensee contemporaneously with the giving of such
notice to Licensee, (ii) to advise the Corporation in a timely fashion of any
sale, by foreclosure or otherwise, of such lender's interest in the
collateral, and (iii) to afford the Corporation an opportunity to participate
as a buyer in any such sale.
IN WITNESS WHEREOF, the undersigned have set their hands and seals this
8 day of August, 1995.
ROMAC AND ASSOCIATES, INC.
By: /s/ Howard Smith 8-11-95
---------------------------------------
BAYSHARE, INC.
By: /s/ John R. McLaughlin President 9-1-95
----------------------------------------
/s/ John R. McLaughlin
-------------------------------------------
John R. McLaughlin,
individually
/s/ Steven A. Reiter
---------------------------------------
Steven A. Reiter,
individually
13
<PAGE> 14
EXHIBIT A
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
a. PROS OPERATING SYSTEM This includes automated faxing, electronic mail, uniplex Individually quoted.
AND NETWORK SERVICES word processing, search assignment, company, prospect,
consultant and print support services. This also includes
ongoing updates and revisions.
b. PROS ACCTG SYSTEM Local processing version - software only, all input, Equipment and line charges
processing and reporting will be done locally. Includes (location driven) plus per
g/l, p/r, a/p, and a/r access including automated inter- transaction charge.
faces to the operating modules.
c. FMA ACCOUNTING All accounting and reporting including payroll for temp Individually quoted.
and perm employees and billing. Cash flow, collections
and accounts payable are the responsibility of the
franchisee.
d. TRAINING Internal and external training available through third $2,500/5 day plus expenses.
party sources Romac International. On-site: $1k/day plus exp.
e. MARKETING/PROMOTIONS Use of national brochures, ads, etc., development and Cost plus amortization of
local programs. creative costs over total
units.
f. BUSINESS PLANNING Assist in the development of annual and quarterly business $2k/day plus expenses.
plans. New product development, compensation plans,
margin management, cash planning, etc.
g. SERVE ON BOD Serve on Board of Directors in formal meeting. Assist $2k plus exp and D&O Insur.
in the development of strategic plan including exit
strategy.
</TABLE>
<PAGE> 1
EXHIBIT 10.22
HYDE PARK PLACE, LTD. II
PARKER STREET PROPERTY
PARKING AGREEMENT
This Agreement between Hyde Park Place Ltd., II, Lessor, and Romac
International, Lessee, will provide for the payment of monthly parking fees by
the Lessee to the Lessor for the lot located between Platt Street, Parker
Street and Hyde Park Place (the Lot), according to the following terms and
conditions:
TERM: The Term of this Agreement shall be fifteen (15) years beginning
April 15, 1995 (but shall be cancellable by Lessee upon
satisfaction of the first mortgage debt encumbering the Lot);
RENTAL: Lessee shall pay Lessor as monthly rental an amount equal to
1/12 of the annual debt service owed by Lessor to the First
Mortgagee (currently Village Bank) plus applicable sales tax.
Said annual debt service payment and therefore monthly rental
shall be subject to adjustment at the 5th year anniversary
and the 10th year anniversary of this Agreement;
EXPENSES: Lessee shall pay Lessor directly on a monthly basis 1/12 of
the annual property expenses for the Lot, including but
not limited to, ad valorem taxes, expenses for repair and
maintenance expense, security, electrical usage, insurance
premiums, policing and trash removal, etc.;
CAPITAL
IMPROVEMENTS: Except for any initial capital improvements, Lessee shall be
responsible for any and all subsequent capital
improvements to the Lot;
USAGE: Lessee shall have exclusive use of the Lot including the
right to sublease, rent the lot for special events, etc.;
This Agreement shall be binding on the parties and any successors in interest.
In Witness Whereof the parties have executed this Agreement on this day,
13th of April, 1995.
LESSOR: LESSEE:
HYDE PARK PLACE, LTD. II ROMAC INTERNATIONAL, INC.
/s/ Daniel B. Howell /s/ David L. Dunkel
- --------------------------- -------------------------------
Daniel B. Howell, President David L. Dunkel, President
Bay Villa Developers, Inc.
as general partner
<PAGE> 1
EXHIBIT 10.26
SPLIT DOLLAR AGREEMENT F/B/O ________________________________________________
THIS PLAN is adopted by agreement between the Company and
Owner as of the _____ day of ________________.
DEFINITIONS:
A. "Company": ______________________, a Florida corporation.
B. "Employee": _____________________________________________.
C. "Insurer": _____________________________________________.
D. "Insured": _____________________________________________.
E. "Owner": _____________________________________________.
F. "Policy": The policy of insurance on the lives of
Insured issued by the Insurer and listed on Schedule "A" attached hereto,
together with any supplementary contracts issued by the Insurer in conjunction
with that policy.
G. "Policy Interest": The Company's Policy Interest will
be the total amount of premiums paid by the Company that have not been repaid
prior to death, and that have not been paid for by the Company by borrowing
from the Insurer.
PURPOSE OF THE PLAN: Employee is a valued employee of the
Company and the Company wishes to retain him in its employ. ___________________
__________________________________________________________ is the Owner of the
Policy on the life of Employee. The Company is willing to assist the Owner in
paying the premiums on the Policy by contributing from time to time toward
payment of premiums due on the Policy. This Plan sets forth the mutual
interests and obligations of the Company and Owner on the implementation of
this Plan.
THEREFORE, for value received, it is agreed:
1. Insurance. Owner has purchased the Policy and shall
maintain it in effect until the termination of this agreement.
2. Payment of Premiums. Effective the _____________ day
of _____________, premium payments for the current Policy Year, and all premium
payments thereafter, shall be paid by the Company and the Owner in accordance
with the formula set forth below. Unless otherwise agreed to by the Company
and the Owner, all premium payments are to be made in accordance with and
subject to the following terms and conditions:
<PAGE> 2
(a) On or before the due date of each required
premium on the Policy, the Company shall pay to the Owner or the
Insurer the amount specified as Company Premium in Schedule B for the
applicable policy year for each year that this agreement is in force.
(b) Owner shall pay to the Insurer the amount
received from the Company and the amount specified as Owner Premium in
Schedule B for the applicable policy year for each year that this
agreement is in force. Owner's share of the premium has been
calculated using the Insurer's current published premium rate for
annual renewal term insurance for standard risks for an individual
life insurance policy (the PS.58) amount.
(c) Owner shall pay its portion of each premium
on a date no later than a date within the grace period allowed by the
Policy. Upon request by Company, Owner shall provide Company with
proof of payment.
(d) To the extent the Company fails to pay a
portion of any premium due on the Policy, as required by paragraph
2(a), the Owner may, at its option, pay all or any portion of the
premium and deduct that amount from the total value of the Company's
Policy Interest, notwithstanding any other provision of this Plan.
3. Owner's Obligation to Company. Owner agrees to repay
the Company the Policy Interest provided in paragraphs 7 and 9 of this Plan.
4. Policy Ownership. Owner is the owner of the Policy
and may exercise all rights of ownership with respect to the Policy, except as
otherwise provided in this Plan. Such rights include the privilege to exercise
all the rights of an "owner" under the terms of the Policy, including the right
to borrow on the security of the Policy (but only to the extent that the
difference between (i) the cash value of the policy and (ii) the cumulative
amount of the Company's Policy Interest, exceeds the amount of all outstanding
prior loans to the owner made against the Policy); to pledge or assign the
interest in the Policy for such loans or advances; the right, in the event of a
termination of the Plan, to realize against the cash value of the Policy (to
the extent such cash value exceeds the Company's Policy Interest); the right of
Owner, in the event of the Employee's death, to realize against the proceeds of
the Policy received by the Company (to the extent such proceeds exceed the
Company's Policy Interest); and the
2
<PAGE> 3
right, subject to the interest of the Company to be reimbursed for its Policy
Interest, to surrender the Policy. The Company agrees to sign any documents
necessary to assist the Owner in exercising its rights under this Plan. Owner
also has the right to assign its ownership rights to any person or entity it,
in its absolute discretion chooses, but such an assignment will be subject to
the collateral assignment to the Company set forth in paragraph 8 below.
5. Beneficiary Designation. Owner shall cause the
Policy to reflect the respective interests of the parties under this Plan as
follows:
(a) The Company, or its successors, will be the
direct beneficiary of an amount equal to the Policy Interest, less any
indebtedness to the Insurer created in favor of the Company.
(b) Owner will have the right to designate and
change direct and contingent beneficiaries of any remaining proceeds,
and to elect and change any payments for these beneficiaries. Owner
also will have the right to exercise the conversion privilege of any
increased protection, convertible protection benefit, or decreasing
term insurance benefit, and will be the owner of any new policy issued
in lieu of these benefits.
6. Assignment of Company's Interest. Owner shall
collaterally assign the Policy to the Company as security for repayment of the
amounts that the Company pays or has paid to Insurer under paragraph 2(a).
This collateral assignment will not be altered or changed without the consent
of the Company, except that Owner may assign its ownership rights to a third
party, as provided in paragraph 4 of this Plan.
7. Procedure at Death of Insured. Upon the death of the
Insured while the Policy and this Plan are in force, Owner shall promptly take
all necessary steps to obtain payment from the Insurer of the amounts payable
under the Policy to the respective parties, in accordance with the beneficiary
designations set forth as provided in paragraph 5 above. The amount to which
the Company is entitled will be the Policy Interest. Owner will be entitled to
all remaining proceeds.
8. Termination of Agreement. This Plan will terminate
on the first to occur of the following:
(a) A signed written agreement by Owner and the
Company; or
3
<PAGE> 4
(b) Bankruptcy or receivership of the Company.
9. Disposition of Policy Upon Termination of Plan. Upon
termination of the Plan, Owner will have a period of sixty (60) days in which
to repay to the Company the Company's Policy Interest. Upon receipt of this
amount, the Company will release the collateral assignment of the Policy. If
Owner fails to repay the Company's Policy Interest within sixty (60) days
following termination of this agreement, the Company may enforce any right it
has under the collateral assignment of the Policy.
10. The Insurer. The Insurer is not deemed a party to
this Plan, is not bound by the Plan, or deemed to have notice of the provisions
of this Plan. Rather, the Insurer will be bound only by the provisions of and
endorsements on the Policy, and any payments made or actions taken by it in
accordance with those provisions or endorsements will fully discharge it from
all claims, suits and demands of all persons whatsoever.
11. Special Provisions. The following provisions are
part of this Plan and are intended to meet the requirements of the Employee
Retirement Income Security Act of 1974:
(a) The named fiduciary: The Company.
(b) The funding policy under this Plan is that
the Company and Owner remit all premiums on the Policy when due.
(c) Direct payment by the Insurer is the basis of
payment of benefits under this Plan, with those benefits in turn being
based on the payment of premiums by the Company and Owner.
(d) For claims procedures, the "Claims Manager"
shall be the president of the Company, or any other person who the
president designates in a writing delivered to that person.
(i) If for any reason a claim for
premium payment under this Plan is denied by the Company, the
Claims Manager shall deliver to the claimant a written
explanation setting forth the specific reasons for the denial,
pertinent references to the Plan's section on which the denial
is based, such other data as may be pertinent and information
on the procedures to be followed by the claimant
4
<PAGE> 5
in obtaining a review of his claim, all written in a manner
calculated to be understood by the claimant. For this
purpose, the claimant's claim is deemed to be filed when
presented orally or in writing to the Claims Manager, whose
written explanation is to be delivered to the claimant within
thirty (30) days of the date the claim is filed.
(ii) The claimant will have thirty (30)
days following his receipt of the denial of the claim to file
with the Claims Manager a written request for review of the
denial. For such review, the claimant or his representative
may submit pertinent documents and written issues and
comments.
(iii) The Claims Manager shall decide the
issue on review and furnish his decision, in writing, to the
claimant within thirty (30) days of receipt of the claimant's
request for review of his claim. The decision on review is to
be in writing and include specific reasons for the decision
written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent Plan
provisions on which the decision is based. If a copy of the
decision is not so furnished to the claimant within this
thirty (30) day period, the claim will be deemed denied on
review.
12. General Provisions.
(a) This Plan constitutes the entire agreement
between the parties hereto and supersedes any and all prior agreements
and understandings, oral and written, between the parties hereto with
respect to the subject matter of this Plan; and no modification or
amendment will be valid unless in writing and signed by all of the
parties hereto.
(b) This Plan is to be governed and interpreted
in accordance with the laws of the State of Florida.
(c) Whenever possible each provision of this
agreement is to be interpreted in a manner as
5
<PAGE> 6
to be effective and valid under applicable law, but if any provision
is prohibited or invalid under applicable law, that provision will be
ineffective to the extent of the prohibition or invalidity, without
invalidating the remainder of the provisions or the remaining portions
of this Plan. To the extent permitted by law, the parties waive any
provision of the law that renders a provision contained in this Plan
prohibited or unenforceable in any respect.
IN WITNESS WHEREOF, the parties have executed this Plan, in
duplicate, this _________ day of ________________________________.
"COMPANY"
ATTEST:
-------------------------------------
- ----------------------------------
- ----------------------------------
By:
----------------------------------
as its
------------------------------
(Corporate Seal)
"OWNER"
- ----------------------------------
Witness
- ---------------------------------- -------------------------------------
Witness
-------------------------------------
6
<PAGE> 7
SCHEDULE A
SPLIT DOLLAR INSURANCE CONTRACT
INSURER:
--------------------------------------------------------------------
POLICY NO.
------------------------------------
7
<PAGE> 8
SCHEDULE B
SPLIT DOLLAR INSURANCE CONTRACT
FACE AMOUNT $
-------------------------------
ANNUAL PREMIUM $
------------------------
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Company's Owner's
Policy Company's Owner's Death Death
Year Premium Premium Benefit Benefit
- ------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Company's Owner's
Policy Company's Owner's Death Death
Year Premium Premium Benefit Benefit
- ------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
</TABLE>
9
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
1. Romac & Associates of Boston, Inc., a Massachusetts corporation, doing
business as Romac Professional Temporaries, Romac Contract Services,
and Romac Search
2. Romac & Associates of Ft. Lauderdale, Inc., a Florida corporation, doing
business as Romac Professional Temporaries, Romac Contract Services,
and Romac Search
3. Romac International of Texas, Inc., a Florida corporation, doing business
as Romac Professional Temporaries, Romac Contract Services, and Romac
Search
4. Romac International of Minnesota, Inc., a Florida corporation, doing
business as Romac Professional Temporaries, Romac Contract Services,
and Romac Search
5. Romac International of Pennsylvania, Inc., a Florida corporation, doing
business as Romac Professional Temporaries, Romac Contract Services,
and Romac Search
6. FMA Temporaries of Chicago, Inc., a Florida corporation, doing business as
Romac Professional Temporaries, Romac Contract Services, and Romac
Search
7. Romac Temporaries, Inc., a Delaware corporation, doing business as Romac
Professional Temporaries, Romac Contract Services, and Romac Search
8. Romac & Associates, Inc., a Massachusetts corporation
9. FMA International, Inc., a Florida corporation
10. Romac/LANORF, Inc., a Delaware corporation
11. Romac/NCRALF, Inc., a Delaware corporation
12. Romac International of Kentucky, Inc., a Florida corporation
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 15, 1996,
relating to the financial statements of Romac International, Inc., and of our
report dated March 20, 1996, relating to the financial statements of Venture
Networks, Inc., which appear in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedules for the three
years ended December 31, 1995, listed under Item 16(b) of this Registration
Statement when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in such report also
included these schedules. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
Price Waterhouse LLP
Tampa, Florida
May 8, 1996
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-1 of our report dated April 18, 1996,
relating to the financial statements of PCS Group, Inc., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Deming, Malone, Livesay & Ostroff, P.S.C.
DEMING, MALONE, LIVESAY & OSTROFF, P.S.C.
Louisville, Kentucky
May 8, 1996
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of my report dated May 8, 1996, relating to
the financial statements of Strategic Outsourcing, Inc., which appears in such
Prospectus. I also consent to the reference to me under the heading "Experts"
in such Prospectus.
/s/ Robert J. Dennehy
ROBERT J. DENNEHY
Medfield, Massachusetts
May 8, 1996
