-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UB9oR+omcq7e58ucz8kHWxQpjkBfhlxyysimnZuBVtiPPEt6WWGcaV32ZjMMdHhY w+vNkie94stg25+gegyN1g== 0000892569-99-000238.txt : 19990211 0000892569-99-000238.hdr.sgml : 19990211 ACCESSION NUMBER: 0000892569-99-000238 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981227 FILED AS OF DATE: 19990210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMEDYTEMP INC CENTRAL INDEX KEY: 0001013467 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 952890471 STATE OF INCORPORATION: CA FISCAL YEAR END: 0929 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20831 FILM NUMBER: 99526769 BUSINESS ADDRESS: STREET 1: 32122 CAMINO CAPISTRANO CITY: SAN JUAN CAPISTRANO STATE: CA ZIP: 92675 BUSINESS PHONE: 7146611211 MAIL ADDRESS: STREET 1: 32122 CAMINO CAPISTRANO STREET 2: 32122 CAMINO CAPISTRANO CITY: SAN JUAN CAPISTRANO STATE: CA ZIP: 92675 10-Q 1 FORM 10-Q FOR QUARTER ENDED DEC 27, 1998 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-Q -------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-5260 REMEDYTEMP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-2890471 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 101 ENTERPRISE ALISO VIEJO, CALIFORNIA 92656 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 425-7600 -------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of February 8, 1998 there were 7,010,024 shares of Class A Common Stock and 1,805,539 shares of Class B Common Stock outstanding. ================================================================================ 2 REMEDYTEMP, INC. INDEX
PAGE NO. PART I--FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet as of December 27, 1998 and September 27, 1998.......................... 3 Consolidated Statement of Income for the three fiscal months ended December 27, 1998 and December 28, 1997............................................................................ 4 Consolidated Statement of Cash Flows for the three fiscal months ended December 27, 1998 and December 28, 1997............................................................................ 5 Notes to Consolidated Financial Statements......................................................... 6 Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations........................................................................................ 7 Item 3. Quantitative and Qualitative Disclosure About Market Risk...................................... * PART II--OTHER INFORMATION Item 1. Legal Proceedings.............................................................................. * Item 2. Changes In Securities and Use of Proceeds...................................................... * Item 3. Defaults Upon Senior Securities................................................................ * Item 4. Submission of Matters to a Vote of Security Holders............................................ * Item 5. Other Information.............................................................................. * Item 6. Exhibits and Reports on Form 8-K............................................................... 11 SIGNATURES ................................................................................................... 12
* No information provided due to inapplicability of item. 2 3 REMEDYTEMP, INC. PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ASSETS
DECEMBER 27, SEPTEMBER 27, 1998 1998 ------------ ------------- Current assets: Cash and cash equivalents .......................................................... $ 2,382 $ 450 Accounts receivable, net of allowance for doubtful accounts of $2,892 and $2,647, respectively ........................................................ 66,457 63,660 Prepaid expenses and other current assets .......................................... 2,623 3,401 Deferred income taxes .............................................................. 2,985 2,235 ------- ------- Total current assets ....................................................... 74,447 69,746 Fixed assets, net of accumulated depreciation of $13,278 and $12,560, respectively .... 16,923 15,184 Other assets, net ..................................................................... 2,426 2,567 Deferred income taxes ................................................................. 501 501 Goodwill, net of accumulated amortization of $190 and $152, respectively .............. 1,749 1,787 ------- ------- $96,046 $89,785 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ................................................................... $ 9,058 $ 3,033 Accrued workers' compensation ...................................................... 6,292 5,535 Accrued payroll, benefits and related costs ........................................ 9,229 13,604 Accrued licensees' share of gross profit ........................................... 2,818 3,194 Other accrued expenses ............................................................. 884 865 Income taxes payable ............................................................... 3,695 809 Current portion of capitalized lease obligation .................................... 209 245 ------- ------- Total current liabilities .................................................. 32,185 27,285 Capitalized lease obligation .......................................................... 11 63 ------- ------- 32,196 27,348 ------- ------- Commitments and contingent liabilities Shareholders' equity: Preferred Stock, $.01 par value; authorized 5,000 shares; none outstanding Class A Common Stock, $.01 par value; authorized 50,000 shares; 7,046 and 7,206 issued and outstanding at December 27, 1998 and September 27,1998, respectively ..................................................................... 71 72 Class B Non-Voting Common Stock, $.01 par value; authorized 4,530 shares; 1,806 issued and outstanding at December 27, 1998 and September 27, 1998, respectively . 18 18 Additional paid-in capital ............................................................ 32,461 34,732 Retained earnings ..................................................................... 31,300 27,615 ------- ------- Total shareholders' equity ............................................................ 63,850 62,437 ------- ------- $96,046 $89,785 ======= =======
See accompanying notes to consolidated financial statements. 3 4 REMEDYTEMP, INC. CONSOLIDATED STATEMENT OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 27, DECEMBER 28, 1998 1997 -------- -------- Direct sales ........................... $ 66,438 $ 69,431 Licensed sales ......................... 52,694 40,939 Franchise royalties .................... 660 775 Initial license and franchise fees ..... 34 -- -------- -------- Total revenues ................. 119,826 111,145 Cost of direct sales ................... 51,660 54,643 Cost of licensed sales ................. 39,146 30,657 Licensees' share of gross profit ....... 9,141 6,936 Selling and administrative expenses .... 13,175 12,634 Depreciation and amortization .......... 795 660 -------- -------- Income from operations ......... 5,909 5,615 Other income: Interest income, net ................ 23 48 Other, net .......................... 210 346 -------- -------- Income before provision for income taxes 6,142 6,009 Provision for income taxes ............. 2,457 2,494 -------- -------- Net income ............................. $ 3,685 $ 3,515 ======== ======== Net income per share, basic (Note 2) ... $ 0.41 $ 0.39 ======== ======== Weighted-average number of shares ...... 8,968 8,947 ======== ======== Net income per share, diluted (Note 2) . $ 0.41 $ 0.38 ======== ======== Weighted-average number of shares ...... 9,053 9,221 ======== ========
See accompanying notes to consolidated financial statements. 4 5 REMEDYTEMP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED Cash flows provided by (used in) operating activities: DECEMBER 27, DECEMBER 28, 1998 1997 ------- ------- Net income ......................................................................... $ 3,685 $ 3,515 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................................................. 795 660 Provision for losses on accounts receivable ................................... 368 388 Deferred taxes ................................................................ (750) (750) Changes in assets and liabilities: Accounts receivable ........................................................ (3,165) (4,705) Prepaid expenses and other current assets .................................. 778 213 Other assets ............................................................... 141 (352) Accounts payable ........................................................... 6,025 (1,332) Accrued workers' compensation .............................................. 757 1,418 Accrued payroll, benefits and related costs ................................ (4,375) (3,424) Accrued licensees' share of gross profit ................................... (376) (218) Other accrued expenses ..................................................... 19 (369) Income taxes payable ....................................................... 2,886 1,399 ------- ------- Net cash provided by (used in) operating activities ................................ 6,788 (3,557) ------- ------- Cash flows used in investing activities: Purchase of fixed assets ........................................................... (2,496) (1,577) ------- ------- Net cash used in investing activities .............................................. (2,496) (1,577) ------- ------- Cash flows (used in) provided by financing activities: Borrowings under line of credit agreement .......................................... -- 1,000 Repayments under line of credit agreement .......................................... -- (1,000) Repayments under capital lease obligation .......................................... (88) (110) Proceeds from stock option activity ................................................ 5 108 Purchase of Company Common Stock ................................................... (2,421) -- Proceeds from Employee Stock Purchase Plan activity ................................ 144 149 ------- ------- Net cash (used in) provided by financing activities ............................... (2,360) 147 ------- ------- Net increase (decrease) in cash and cash equivalents ................................. 1,932 (4,987) Cash and cash equivalents at beginning of period ..................................... 450 5,128 ------- ------- Cash and cash equivalents at end of period ........................................... $ 2,382 $ 141 ======= ======= Other cash flow information: Cash paid during the period for interest ........................................... $ 23 $ 28 Cash paid during the period for income taxes ....................................... $ 321 $ 1,846
See accompanying notes to consolidated financial statements. 5 6 REMEDYTEMP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of RemedyTemp, Inc. (the "Company") including its wholly-owned subsidiary, Remedy Insurance Group, LTD ("RIG"). All significant intercompany transactions and balances have been eliminated. The accompanying consolidated balance sheet at December 27, 1998, and the consolidated statements of income and of cash flows for the three fiscal months ended December 27, 1998 are unaudited. These statements have been prepared on the same basis as the Company's audited consolidated financial statements and in the opinion of management reflect all adjustments, which are only of a normal recurring nature, necessary for a fair presentation of the consolidated financial position and results of operations for such periods. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Form 10-K as filed with the Securities and Exchange Commission on December 21, 1998. 2. EARNINGS PER SHARE DISCLOSURE Earnings per share is calculated as follows:
THREE FISCAL MONTHS ENDED ---------------------------------------------------------------------------------------- DECEMBER 27, 1998 DECEMBER 28, 1997 ------------------------------------------ ------------------------------------------- INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNTS (NUMERATOR) (DENOMINATOR) AMOUNTS BASIC EPS Income available to common shareholders ................ $3,685 8,968 $ 0.41 $3,515 8,947 $ 0.39 ======== ======= EFFECT OF DILUTIVE SECURITIES Stock options ............... $ -- 85 $ -- 274 ------ ------ ------ ----- DILUTED EPS Income available to common shareholders plus assumed conversions ................. $3,685 9,053 $ 0.41 $3,515 9,221 $ 0.38 ====== ====== ======== ====== ===== =======
3. STOCK OPTIONS Under the terms of the Company's 1996 Stock Incentive Plan, as amended, on November 3, 1998 the Company granted options to purchase 12 shares of Class A Common Stock to a newly-hired Vice President at $19.06 per share and on December 8, 1998 the Company granted options to purchase 225 shares of Class A Common Stock to certain executives and employees at $14.75 per share, the average stock price of the Class A Common Stock on such grant dates. This plan is "non-compensatory" under APB No. 25, and accordingly, no compensation expense was recorded in connection with these grants. 4. STOCK REPURCHASE On October 2, 1998, the Board of Directors authorized the Company to repurchase its outstanding Class A and/or Class B Common Stock in the open market or in privately negotiated transactions at the prevailing market prices not to exceed $5,000 in the aggregate. During the three fiscal months ended December 27, 1998, the Company repurchased 166.9 Class A Common Stock shares at prices ranging from $12.56 to $15.13, for a total of $2,421. Subsequent to December 27, 1998, the Company repurchased 36.0 Class A Common Stock shares at prices ranging from $14.85 to $14.94, for a total of $535. 6 7 REMEDYTEMP, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS In addition to historical information, management's discussion and analysis includes certain forward-looking statements, including, but not limited to, those related to the growth and strategies, future operating results and financial position as well as economic and market events and trends of the Company. All forward-looking statements made by the Company, including such statements herein, include material risks and uncertainties and are subject to change based on factors beyond the control of the Company. Accordingly, the Company's actual results and financial position could differ materially from those expressed or implied in any forward-looking statement as a result of various factors, including without limitation those factors described in the Company's filings with the Securities and Exchange Commission regarding risks affecting the Company's financial conditions and results of operations. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. RESULTS OF OPERATIONS For the Three Fiscal Months Ended December 27, 1998 Compared to the Three Fiscal Months Ended December 28, 1997 Total revenues increased 7.8% or $8.7 million to $119.8 million for the three fiscal months ended December 27, 1998 from $111.1 million for the three fiscal months ended December 28, 1997. Direct revenues decreased 4.3% to $66.4 million from $69.4 million, while licensed revenues increased 28.7% to $52.7 million from $40.9 million for the three fiscal months ended December 27, 1998 and December 28, 1997, respectively. The expansion of business at existing licensed offices as well as the opening of 21 new licensed offices since the prior period account for the increase in licensed revenue. The Company's management expects the trend of licensed revenue expanding more rapidly than direct revenue to continue for the foreseeable future, however, the Company's future revenue increases depend significantly on the Company's ability to continue to attract new clients, retain existing clients, open new offices and manage newly opened offices to maturity. The Company recently experienced extraordinary price competition from a national staffing provider on one of the Company's existing high volume, low gross margin clients that was primarily serviced by the Company's direct offices. As of December 1998, the Company discontinued providing service to this client for various reasons, including the Company's strategic emphasis on maintaining acceptable gross margin levels on all client accounts. Excluding this client, revenues at the Company owned offices increased 9.0% and total Company revenue increased 16.8% for the three fiscal months ended December 27, 1998. In light of the significant market demand for the Company's staffing services from clients and potential clients who accept the Company's customary gross margin requirements, the Company believes that it should be able to continue to maintain its gross margin requirements and to expand its business on that basis, however, no assurance in this regard can be given. Total cost of direct and licensed sales, which consists of wages and other expenses related to the temporary associates, increased 6.5% or $5.5 million to $90.8 million for the three fiscal months ended December 27, 1998 from $85.3 million for the three fiscal months ended December 28, 1997, due to increased revenues as discussed above. Total cost of direct and licensed sales as a percentage of revenues was 75.8% for the three fiscal months ended December 27, 1998 compared to 76.7% for the three fiscal months ended December 28, 1997. The Company's cost of licensed sales as a percentage of licensed sales decreased to 74.3% for the three fiscal months ended December 27, 1998 compared to 74.9% for the three fiscal months ended December 28, 1997. Licensees' share of gross profit represents the net payments to licensees based upon a percentage of gross profit generated by the licensed operation. The percentage of gross profit earned by the licensee generally is based on the number of hours billed. In general, pursuant to terms of the Company's franchise agreement for licensed offices executed prior to March 31, 1999, the Company's share of gross profit cannot be less than 7.5% of the licensed operation sales, with the exception of national accounts on which the Company's fee is reduced to compensate for lower gross margins. For franchise agreements for licensed offices executed on or after April 1, 1999, the Company's share of gross profit cannot be less than 8.75% of the licensed operation sales. Licensees' share of gross profit increased 31.8% or $2.2 million to $9.1 million for the three fiscal months ended December 27, 1998 from $6.9 million for the three fiscal months ended 7 8 REMEDYTEMP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) December 28, 1997 due to increased billings at existing licensed offices and to the opening of 21 new offices. Licensees' share of gross profit as a percentage of total revenues increased to 7.6% for the three fiscal months ended December 27, 1998 from 6.2% for the three fiscal months ended December 28, 1997 due to increased licensed revenue as a percentage of total revenue, as discussed above. Licensees' share of gross profit as a percentage of licensed gross profit remained relatively constant. Selling, general and administrative expenses (including depreciation and amortization) increased 5.1% or $0.7 million to $14.0 million for the three fiscal months ended December 27, 1998 from $13.3 million for the three fiscal months ended December 28, 1997. Selling, general and administrative expenses as a percentage of total revenues decreased to 11.7% for the three fiscal months ended December 27, 1998 from 12.0% for the three fiscal months ended December 28, 1997. The Company has continued to control growth in selling, general and administrative expenses by tightening cost controls through budgetary analysis and implementing more stringent hiring and compensation guidelines. There can be no assurance that selling, general and administrative expenses will not increase in the future, both in absolute terms and as a percentage of total revenues, and increases in these expenses could adversely affect the Company's profitability. Income from operations increased 5.2% or $0.3 million to $5.9 million for the three fiscal months ended December 27, 1998 from $5.6 million for the three fiscal months ended December 28, 1997 due to the factors described above. Income from operations as a percentage of revenues was 4.9% for the three fiscal months ended December 27, 1998 compared to 5.1% for the three fiscal months ended December 28, 1997, due to the change in business mix between licensed revenue and direct revenue, since direct revenue generally provides better operating margins than licensed revenue. Net income increased 4.8% or $0.2 million to $3.7 million for the three fiscal months ended December 27, 1998 from $3.5 million for the three fiscal months ended December 28, 1997 due to the factors described above. As a percentage of total revenues, income before income taxes was 3.1% in the three fiscal months ended December 27, 1998 compared to 3.2% in the three fiscal months ended December 28, 1997. All revenues and results were internally generated by the Company. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $6.8 million for the three fiscal months ended December 27, 1998 and cash used in operating activities was $3.6 million for the three fiscal months ended December 28, 1997. Cash provided by operating activities was significantly impacted by changes in working capital primarily resulting from increases in business volumes. Cash used for purchases of fixed assets was $2.5 million for the three fiscal months ended December 27, 1998, and $1.6 million for the three fiscal months ended December 28, 1997. The increase in fiscal 1999 primarily resulted from expenditures associated with leasehold improvements at direct offices and the Company's new management information system, including the related purchases of computer hardware to support the new system. Implementation of this system is expected to begin in early calendar year 1999. During the next twelve months, the Company anticipates capital expenditures associated with direct office openings, and further investments in the Company's computer-based technologies to approximate $5.0 million. In connection with the Company's initial public offering (the "Offering"), the Company terminated its S corporation status and, as a result, was required to change its overall method of accounting for tax reporting purposes from the cash method to the accrual method, resulting in a one-time net charge to earnings in the fourth quarter of fiscal 1996 of approximately $7.8 million. The Internal Revenue Code allows the Company to recognize the effects of this termination in its tax returns over a four-year period. This resulted in additional quarterly installments of $750,000 in the first fiscal quarter of 1999 and 1998, respectively. The Company has a revolving line of credit agreement with Bank of America providing for aggregate borrowings and letters of credit of $30.0 million. Interest on outstanding borrowings is payable monthly at the bank's reference rate or, at the Company's discretion, LIBOR plus 1.5%. The line of credit is unsecured and expires on February 28, 1999. Management is currently negotiating a renewal of the line of credit facility. The principal use of the line of credit has been to finance receivables and to provide a letter of credit required in connection with the Company's workers' compensation self-insurance program. The Company had no balance outstanding under its line of credit and $6.7 million 8 9 REMEDYTEMP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) in undrawn letters of credit as of December 27, 1998. The bank agreement governing the line of credit requires the Company to maintain certain financial ratios and comply with certain restrictive covenants. The Company is in compliance with these requirements. Additionally, RIG has a letter of credit agreement with Bank of Bermuda (New York) Limited in the amount of $80,000. The letter of credit is unsecured, expires on July 22, 1999 and is required in connection with the Company's workers' compensation self-insurance program. The Company is contemplating certain strategic acquisitions. Such acquisitions may have an impact on liquidity depending on the size of the acquisition. On October 2, 1998, the Board of Directors authorized the Company to repurchase its outstanding Class A and/or Class B Common Stock in the open market or in privately negotiated transactions at the prevailing market prices not to exceed $5.0 million in aggregate. During the three fiscal months ended December 27, 1998, the Company repurchased 166,900 Class A Common Stock shares at prices ranging from $12.56 to $15.13, for a total of $2.4 million. Subsequent to December 27, 1998, the Company has repurchased 36,000 Class A Common Stock shares at prices ranging from $14.85 to $14.94 for a total of $535,600. The Company believes that its current and expected levels of working capital and line of credit are adequate to support present operations and to fund future growth and business opportunities. YEAR 2000 COMPLIANCE The Company's State of Readiness Many computer systems and other equipment with embedded chips or processors use only two digits to represent the year and may be unable to accurately process certain data before, during or after the Year 2000. Consequently, business and governmental entities are at risk for possible miscalculations or systems failures causing disruptions in their business operation. Furthermore, the Year 2000 is a leap year, which may present additional issues for computer systems and other equipment with embedded chips or processors. Year 2000 issues may affect the Company's internal systems, including information technology ("IT") and non-IT systems. The Company is assessing the readiness of its systems for handling the Year 2000. Although the assessment is still underway, the Company currently believes that all material IT systems will be compliant by the Year 2000. The Company is in the final year of a three-year development and implementation process to replace all of its material IT systems with a new IT system. The Company believes that the new IT system and the computer hardware used to operate the system will be Year 2000 compliant. The Company anticipates that implementation of the new IT system will be completed for all "back office" systems (i.e. payroll, billing, general ledger, accounts payable, and accounts receivable) by October of 1999. The Company plans to implement the "front office" applications (i.e. administration, search and retrieval of data, and coordination of temporary employees) of the new IT system to all Company-owned offices by July of 1999 and to all independently-managed offices by October of 1999. There can be no guarantee that these estimated dates will be achieved and actual results could differ materially from those anticipated. Based on information currently available, the Company believes that it does not have any material-specific dependencies on its non-IT systems (devices that have imbedded microprocessors). Accordingly, the Company believes that the Year 2000 poses no material risk to the Company's non-IT systems. The Company is in the process of contacting its material suppliers of products and services to determine that the suppliers' operations and the products and services they provide are Year 2000 compliant and will monitor their progress toward Year 2000 compliance. There can be no assurance that the Company's material suppliers, vendors or other third parties will not suffer a Year 2000 business disruption. Such failures could have a material adverse affect on the Company's financial condition and results of operations. 9 10 REMEDYTEMP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Costs to Address the Company's Year 2000 Issues The Company's new IT system is being implemented for strategic business reasons unrelated to Year 2000 issues and the implementation schedule was not accelerated due to Year 2000 issues. Therefore, no specific costs were incurred to address Year 2000 issues relating to the Company's new IT system. However, the Company is in the process of implementing a contingency plan effort to bring the Company's existing IT systems into Year 2000 compliance in the event that the implementation of the new IT system is delayed. Currently, the Company estimates that the total expected costs relating to this effort will be $200,000. The Risks to the Company of Year 2000 Issues Although unclear at this time, the Company believes that its exposure to Year 2000 risks are unlikely to have a material effect on the Company's results of operations, liquidity and financial condition. The Company anticipates that the new IT system will be implemented prior to the Year 2000 and such system is believed to be Year 2000 compliant. Although the Company expects to implement its new IT system prior to the Year 2000, there is no guarantee that this result will be achieved. Consequently, the Company believes that its most reasonably likely worst case Year 2000 scenario is that the new IT system is not implemented on time and the Company's contingency plans to address this fail. Such a scenario could disrupt the Company's business and therefore could have a material adverse effect on the financial condition and results of operations. Additionally, if any third parties that provide goods or services that are critical to the Company's business fail to appropriately address their Year 2000 issues, there could be a material adverse effect on the Company's financial condition and results of operations. The Company's Contingency Plans The Company has not completed the systems integration testing of the new IT system. Accordingly, the Company has not fully assessed its risks from potential Year 2000 failure of the new IT system. However, steps are currently being taken to assess the impact of Year 2000 issues in the Company's existing IT systems to avoid a material impact on the Company's ability to conduct business, including implementing a contingency plan which will bring the Company's existing IT systems into Year 2000 compliance. The likely impact on such existing IT systems would be in "from-to" reporting and date printing which the Company believes it can correct without material loss in business operation or function. Additionally, the Company is currently undertaking steps to identify its material vendors and to formulate a system to understand material third parties' ability to continue providing services and products after the Year 2000. The Company intends to contact and monitor its material suppliers, vendors, and distributors to avoid any business interruption in the Year 2000, including formulating contingency plans, where appropriate. However, the Company can neither predict nor assure the successful outcome of such third parties' remediation efforts. SEASONALITY The Company's quarterly operating results are affected by the number of billing days in the quarter and the seasonality of its clients' businesses. The first fiscal quarter has historically been strong as a result of manufacturing and retail emphasis on holiday sales. The second fiscal quarter historically shows little to no growth, and in some years a decline, in comparable revenues from the first fiscal quarter. Revenue growth has historically accelerated in each of the third and fourth fiscal quarters as manufacturers, retailers and service businesses increase their level of business activity. 10 11 REMEDYTEMP, INC. PART II--OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Set forth below is a list of the exhibits included as part of this Quarterly Report:
Number Exhibit Description - ------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company (a) 3.2 Amended and Restated Bylaws of the Company (h) 4.1 Specimen Stock Certificate (a) 4.2 Shareholder Rights Agreement (a) 10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement 10.2 Paul W. Mikos Amended and Restated Employment Agreement 10.3 R. Emmett McDonough Employment Agreement (a) 10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts (a) 10.5 Registration Rights Agreement with R. Emmett McDonough and Related Trusts (a) 10.6 Letter regarding terms of employment and potential severance of Alan M. Purdy (a) 10.7 Deferred Compensation Agreement for Alan M. Purdy (a) 10.8 Letter regarding potential severance of Jeffrey A. Elias (a) 10.9 Form of Indemnification Agreement (a) 10.11 RemedyTemp, Inc. 1996 Amended and Restated Stock Incentive Plan (h) 10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a) 10.13 Form of Franchising Agreement for Licensed Offices (h) 10.14 Form of Franchising Agreement for Franchised Offices (a) 10.15 Form of Licensing Agreement for IntelliSearch(R) (a) 10.17 Paul W. Mikos Promissory Note (a) 10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b) 10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c) 10.20 Lease Agreement between RemedyTemp, Inc. and Mitchell Land & Improvement Company (d) 10.21 Credit Agreement among Bank of America National Trust and Savings Association and RemedyTemp, Inc. (e) 10.22 RemedyTemp, Inc. Deferred Compensation Plan (e) 10.23 Greg Palmer Employment Agreement (f) 10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors (g) 10.25 Form of Licensing Agreement for i/search2000(TM) (h) 27.1 Financial Data Schedule
(a) Incorporated by reference to the exhibit of same number to the Registrant's Registration Statement on Form S-1 (Reg. No. 333-4276), as amended. (b) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996. (c) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1997. (d) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 29, 1997. (e) Incorporated by reference to the exhibit of same number to the Registrant's Annual Report on Form 10-K for the yearly period ended September 28, 1997. (f) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 28, 1997. (g) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 29, 1998. (h) Incorporated by reference to the exhibit of same number to the Registrant's Annual Report on Form 10-K for the yearly period ended September 27, 1998. (b) Reports on Form 8-K. No reports on Form 8-K were filed in the fiscal quarter ended December 1998. 11 12 REMEDYTEMP, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REMEDYTEMP, INC. February 9, 1999 /s/ PAUL W. MIKOS ------------------------------------------- Paul W. Mikos, President and Chief Executive Officer February 9, 1999 /s/ ALAN M. PURDY ------------------------------------------- Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 12 13 REMEDY TEMP, INC. EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION - ------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company (a) 3.2 Amended and Restated Bylaws of the Company (h) 4.1 Specimen Stock Certificate (a) 4.2 Shareholder Rights Agreement (a) 10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement 10.2 Paul W. Mikos Amended and Restated Employment Agreement 10.3 R. Emmett McDonough Employment Agreement (a) 10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts (a) 10.5 Registration Rights Agreement with R. Emmett McDonough and Related Trusts (a) 10.6 Letter regarding terms of employment and potential severance of Alan M. Purdy (a) 10.7 Deferred Compensation Agreement for Alan M. Purdy (a) 10.8 Letter regarding potential severance of Jeffrey A. Elias (a) 10.9 Form of Indemnification Agreement (a) 10.11 RemedyTemp, Inc. 1996 Amended and Restated Stock Incentive Plan (h) 10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a) 10.13 Form of Franchising Agreement for Licensed Offices (h) 10.14 Form of Franchising Agreement for Franchised Offices (a) 10.15 Form of Licensing Agreement for IntelliSearch(R) (a) 10.17 Paul W. Mikos Promissory Note (a) 10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b) 10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c) 10.20 Lease Agreement between RemedyTemp, Inc. and Mitchell Land & Improvement Company (d) 10.21 Credit Agreement among Bank of America National Trust and Savings Association and RemedyTemp, Inc. (e) 10.22 RemedyTemp, Inc. Deferred Compensation Plan (e) 10.23 Greg Palmer Employment Agreement (f) 10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors (g) 10.25 Form of Licensing Agreement for i/search2000(TM) (h) 27.1 Financial Data Schedule
13 14 REMEDY TEMP, INC. NUMBER EXHIBIT DESCRIPTION - ------- ----------- [S] [C] (a) Incorporated by reference to the exhibit of same number to the Registrant's Registration Statement on Form S-1 (Reg. No. 333-4276), as amended. (b) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996. (c) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1997. (d) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 29, 1997. (e) Incorporated by reference to the exhibit of same number to the Registrant's Annual Report on Form 10-K for the yearly period ended September 28, 1997. (f) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 28, 1997. (g) Incorporated by reference to the exhibit of same number to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 29, 1998. (h) Incorporated by reference to the exhibit of same number to the Registrant's Annual Report on Form 10-K for the yearly period ended September 27, 1998. 14 EX-10.1 2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement ("Agreement") is entered into effective January 7, 1998 by and between REMEDYTEMP, INC., a California corporation (the "Company"), and Robert E. McDonough, Sr., an individual person ("McDonough"), (collectively referred to herein as the "Parties"). WHEREAS, an Employment Agreement was entered into effective December 5, 1994 by and between the Company and McDonough and subsequently was amended effective May 1, 1996 (the "Original Agreement"); WHEREAS, this Agreement has been prepared to amend the Original Agreement pursuant to the approval, direction and authorization of the Leadership Development and Compensation Committee of the Board of Directors of the Company (the "Compensation Committee"); WHEREAS, McDonough has served as Chairman of the Board of the Company ("Chairman") since its inception and Chief Executive Officer from its inception until May 2, 1994; and WHEREAS, the Company desires to maintain the benefits of having McDonough continue to serve as Chairman and McDonough desires to continue to serve as Chairman. NOW, THEREFORE, in consideration of the foregoing promises and mutual covenants, the Parties hereby amend and restate the Original Agreement and agree to the following terms and conditions under which McDonough will serve as Chairman: 1. EMPLOYMENT SERVICES AND DUTIES The Company agrees to employ and retain the services of McDonough as Chairman, and McDonough hereby agrees to continue employment with the Company as its Chairman, for the term of this Agreement. McDonough agrees to perform his duties as Chairman of the Board faithfully, to the best of his ability and in the best interests of the Company, and to preserve and protect the confidential information of the Company, and to perform both his regular duties and strategic projects as requested by the Board of Directors. 2. TERM OF EMPLOYMENT The Company agrees to employ McDonough, and McDonough agrees to serve, as Chairman for the period commencing May 1, 1996 and ending on December 4, 2001 (the "Employment Period"). 3. COMPENSATION TERMS The Company agrees to compensate McDonough for his services rendered as Chairman under this Agreement as follows: (a) McDonough shall receive a base salary set annually by the Compensation Committee; provided, however, that such annual base salary shall not be less than $390,000 per year. 2 (b) McDonough shall receive an annual performance bonus in an amount to be determined by the Compensation Committee based on McDonough's satisfaction of certain performance goals set annually by the Compensation Committee. The amount of McDonough's annual performance bonus shall be no less than $160,000 and no more than 100% of his base salary in any particular year, provided, however, that during the term of that certain Employment Agreement dated effective May 1, 1996, between the Company and Paul W. Mikos as Chief Executive Officer of the Company, McDonough's bonus shall be determined on the same basis and in the same amount as that of the Chief Executive Officer. (c) McDonough shall be entitled to and shall receive any and all other benefits generally available to executive employees of the Company, including participation in health insurance programs and retirement plans. (d) The Company shall pay any and all of McDonough's existing life insurance premium payments as well as any additional life insurance premium payments that McDonough shall deem reasonably appropriate. In the event that McDonough is no longer Chairman or employed by the Company in any other capacity, the Company shall continue to pay such premiums as required under each and every life insurance policy. Notwithstanding the above, the total sum of annual life insurance premium payments made by the Company for McDonough shall not exceed $75,000 per year. (e) The Company shall indemnify McDonough in accordance with the terms and conditions of its then current indemnification agreements with directors of the Company. (f) In the event that McDonough becomes disabled and is unable to perform his duties as Chairman of the Board, he shall continue to receive as disability income the amount of his base salary under Section 3(a), but the Board of Directors may elect another person to serve as Chairman of the Board during the period of McDonough's disability. 4. REGISTRATION RIGHTS The Company shall grant McDonough certain defined registration rights for the stock of the Company owned by McDonough, individually or in a fiduciary capacity, as set forth in that certain Registration Rights Agreement attached hereto as Exhibit A. 5. SEVERABILITY The provisions of this Agreement are severable. If a court of competent jurisdiction determines that any one or more provisions of this Agreement is invalid, void or unenforceable, in whole or in part, it will be severed therefrom. The remaining provisions of this Agreement shall then continue in full force without being impaired or invalidated in any way. 2 3 6. BINDING EFFECT; ASSIGNMENT This Agreement shall inure to the benefit of and be binding on the parties and their respective successors and assigns. 7. ENTIRE AGREEMENT This Agreement constitutes the entire understanding between the parties concerning the subject matter hereof. This Agreement supersedes all negotiations, prior discussions and preliminary agreements. This Agreement may not be amended except in a writing executed by the Parties. 8. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of California. 9. NOTICES All notices, requests, demands and other communication required or contemplated under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or when enclosed in a properly sealed and addressed envelope, registered or certified, and deposited (postage prepaid) in a post office or branch post office regularly maintained by the United States Government. Any notice given to the Company under the terms of this Agreement shall be addressed to the Company at the address of its principal place of business. Any notice to be given to McDonough shall be addressed to him at his home address last shown on the Company's records, or at such other address as either party may hereafter designate in writing to the other. 10. WAIVER No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 11. COUNTERPARTS This Agreement may be executed in counterparts, and such counterparts may be transmitted by facsimile, and all counterparts, taken together, will constitute one and the same document. 3 4 IN WITNESS WHEREOF, the parties have duly executed this Agreement effective January 7, 1998. REMEDYTEMP, INC. By:_________________________________________ Name:_______________________________________ Title:______________________________________ ---------------------------- Robert E. McDonough, Sr. 4 5 EXHIBIT A 6 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made as of May 1, 1996 by and between RemedyTemp, Inc., a California corporation (the "COMPANY"), and Robert E. McDonough, Sr., an individual person ("McDonough"). RECITALS A. Pursuant to that certain Employment Agreement ("EMPLOYMENT AGREEMENT") of even date herewith by and between McDonough and the Company, the Company is required to execute and deliver this Agreement. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the parties agree as follows: 1. CERTAIN DEFINITIONS. Terms used herein but not otherwise defined shall have the meanings ascribed to them in the Employment Agreement. As used in this Agreement, the following terms shall have the following respective meanings: "COMMISSION" shall mean the Securities and Exchange Commission of the United States or any other United States federal agency at the time administering the Securities Act. "HOLDER" shall mean McDonough, all trusts established for the benefit of McDonough or his immediate family, and their transferees as permitted by Section 11, holding Registrable Securities or securities convertible into or exercisable for Registrable Securities. "REGISTRABLE SECURITIES" means (i) the shares of common stock of the Company held by McDonough individually, jointly or in a fiduciary capacity, including as trustee of a trust (the "Shares") and (ii) any shares of common stock of the Company or other securities ("COMMON STOCK") issued or issuable in respect of the Shares upon any stock split, stock dividend, recapitalization, or similar event. Shares shall only be treated as Registrable Securities if they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a single transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale. The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. 7 "REGISTRATION EXPENSES" shall mean all expenses, excluding Selling Expenses (as defined below) except as otherwise stated below, incurred by the Company in complying with Section 2, Section 3 and Section 4 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company and reasonable fees and disbursements of one counsel for the Holder selected by the Holder and approved by the Company (which consent shall not be unreasonably withheld), Blue Sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, or any similar United States federal statute. "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Holder. Such expenses shall be borne by the Holder. 2. DEMAND REGISTRATION. (a) REQUEST FOR REGISTRATION. In the event the Company shall receive a written request from Holder that the Company effect any registration, qualification or compliance with respect to Registrable Securities having an aggregate proposed selling price of not less than One Million Dollars ($1,000,000) (a "REGISTRATION NOTICE"), the Company will, as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under applicable Blue Sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request. Notwithstanding the foregoing, the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2 (i) prior to the effective date of the Company's first registered public offering of its stock or (ii) after the Company has effected two registrations pursuant to this Section 2 and such registrations have been declared or ordered effective. Subject to the foregoing clauses (i) and (ii), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable, after receipt of the request or requests of the Holder. Notwithstanding the foregoing, the Company shall be entitled to defer for a reasonable period of time, but not in excess of 120 days, the filing of any registration statement otherwise required to be prepared and filed by it under this Section 2 if (i) (A) the Company is at such time conducting or about to conduct an underwritten public offering of its securities for its own account and the Board of Directors of the Company determines in good faith that such offering by the Company would be materially adversely affected by such registration 2 8 requested by the Holder(s), (B) the Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Board of Directors of the Company determines in good faith that the Company's ability to pursue or consummate such transaction would be materially adversely affected by such registration requested by the Holder(s), or (C) the Company is in possession of material nonpublic information concerning it or its business and affairs and the Board of Directors of the Company determines in good faith that the prompt public disclosure of such information in such registration requested by the Holder(s) would have a material adverse effect on the Company; and (ii) the Company so notifies the requesting Holder(s) within ten (10) days after the Company's receipt of the Registration Notice from such Holder(s). (b) UNDERWRITING. In the event that a registration pursuant to this Section is for a registered public offering involving an underwriting, the Company shall so advise the Holder as part of the notice given pursuant to Section 2(a). In such event, the right of the Holder to registration pursuant to this Section shall be conditioned upon the Holder's participation in the underwriting arrangements required by this Section, and the inclusion of the Holder's Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein. The Holder shall, together with the Company, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company, but subject to the reasonable approval of the Holder. If the Holder disapproves of the terms of any such underwriting, the Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 3. REGISTRATION ON FORM S-3. (a) REQUEST FOR REGISTRATION. If at any time, or from time to time, the Holder requests that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of Registrable Securities and the Company is a registrant entitled to use Form S-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form and to cause such Registrable Securities to be qualified in such jurisdictions as the Holder may reasonably request. Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 3 more than one (1) time per calendar year. Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable, after receipt of the request or requests of the Holder. Notwithstanding the foregoing, the Company shall be entitled to defer for a reasonable period of time, but not in excess of 120 days, the filing of any registration statement otherwise required to be prepared and filed by it under this Section 3 if (i) (A) the Company is at such time conducting or about to conduct an underwritten public offering of its securities for its own account and the Board of Directors of the Company determines in good faith that such offering by the Company would be materially adversely affected by such registration requested by the Holder(s), (B) the 3 9 Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Board of Directors of the Company determines in good faith that the Company's ability to pursue or consummate such transaction would be materially adversely affected by such registration requested by the Holder(s), or (C) the Company is in possession of material nonpublic information concerning it or its business and affairs and the Board of Directors of the Company determines in good faith that the prompt public disclosure of such information in such registration requested by the Holder(s) would have a material adverse effect on the Company; and (ii) the Company so notifies the requesting Holder(s) within ten (10) days after the Company's receipt of the registration request from such Holder(s). (b) UNDERWRITING. The substantive provisions of Section 2(b) shall be applicable to each such registration initiated under this Section involving an underwriting. 4 10 4. INCIDENTAL REGISTRATIONS. (a) NOTICE OF REGISTRATION. If at any time or from time to time the Company shall determine to file a registration statement under the Securities Act for the general registration of any of its securities to be sold for cash, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to stock option or other employee benefit plans or (ii) a registration relating solely to a Commission Rule 145 transaction, the Company will: (A) promptly give the Holders written notice thereof; and (B) include in such registration (and any related qualification under Blue Sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by the Holder, subject to the terms of Section 4(b). (b) UNDERWRITING. If the registration with respect to which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holder as a part of the written notice given pursuant to Section 4(a)(i). In such event, the right of the Holder to registration pursuant to this Section shall be conditioned upon the Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. The Holder shall, together with the Company, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. If the Holder disapproves of the terms of any such underwriting, the Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. Notwithstanding any provision contained herein to the contrary, if the managing underwriter or underwriters of the registration in which the Company gives notice under this Section 4 shall advise the Company in writing that, in its opinion, the total amount of Registrable Securities that the Holder(s) request to include in such registration, together with any other securities with similar incidental or piggyback registration rights (collectively, the "REQUESTED SECURITIES") is sufficiently large to materially and adversely affect the success of such registration, then the amount and kind of Requested Securities to be offered for the accounts of any Holder whose shares of Requested Securities were requested to be included in such registration shall be reduced pro rata with respect to each such Holder to the extent necessary to reduce the total amount of securities to be included in such registration to the amount recommended by such managing underwriter or underwriters; provided, however, that such reduction shall not include the following: (i) if the registration initially occurs at the insistence of the Company, shares to be issued by the Company; or (ii) if the registration occurs due to a demand registration right, including the Demand Registration provided in Section 2, shares of the Holder(s) making that demand. (c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section prior to the effectiveness of such registration whether or not the Holder has elected to include Registrable 5 11 Securities in such registration; provided, however, if the Holder elects to use its demand registration right pursuant to Section 2, then such registration shall be governed by Section 2 and it shall not be terminated. 5. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date hereof, the Company will not, without the prior written consent of holders of three-quarters of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which allows such holder or prospective holder of any securities of the Company to include such securities in any registration filed under Section 2 hereof, unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not diminish the Holder's registration rights pursuant to such Section 2. 6. EXPENSES OF REGISTRATION. (a) REGISTRATION EXPENSES. The Company shall bear all Registration Expenses incurred in connection with all registrations pursuant to Section 2 or Section 4 hereof, and shall bear all Registration Expenses incurred in connection with the first registration pursuant to Section 3. In the event the Holder withdraws a Registration Notice, abandons a registration statement or, following an effective registration pursuant to Section 2 hereof, does not sell Registrable Securities, then all Registration Expenses in respect of such Registration Notice shall be borne, at the Holder's option, either by the Holder or by the Company (in which case, if borne by the Company, such withdrawn or abandoned registration shall be deemed to be an effective registration for purposes of Section 2(a)(ii) hereof). The Holder shall bear all Registration Expenses incurred in connection with the second and any subsequent registration pursuant to Section 3. (b) SELLING EXPENSES. Unless otherwise stated, all Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the Holders pro rata on the basis of the number of shares so registered. 7. REGISTRATION AND QUALIFICATION. If and whenever the Company is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will as promptly as is practicable: (a) prepare and file with the Commission, as soon as practicable, and use its best efforts to cause to become effective for a time period not to exceed 90 days, a registration statement under the Securities Act relating to the Registrable Securities to be offered on such form as the Holder, or if not filed pursuant to Section 2 or Section 3 hereof, the Company, determines and for which the Company then qualifies; (b) prepare and file with the Commission such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities until the earlier of such time as all of such 6 12 Registrable Securities have been disposed of in accordance with the intended methods of disposition set forth in such registration statement or the expiration of ninety (90) days after such registration statement becomes effective; provided that such ninety (90) day period shall be extended in the case of a registration pursuant to Section 2 or Section 3 hereof for such number of days that equals the number of days elapsing from (i) the date the written notice contemplated by Section 7(f) hereof is given by the Company to (ii) the date on which the Company delivers to the Holder the supplement or amendment contemplated by Section 7(f) hereof; (c) furnish to the Holder and to any underwriter of Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as the Holder or such underwriter may reasonably request; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of such registration statement at the earliest possible moment; (e) if requested by the Holder, (i) furnish to the Holder an opinion of counsel for the Company addressed to the Holder and dated the date of the closing under the underwriting agreement (if any) (or if such offering is not underwritten, dated the effective date of the registration statement), and (ii) use its best efforts to furnish to the Holder a "comfort" or "special procedures" letter addressed to the Holder and signed by the independent public accountants who have audited the Company's financial statements included in such registration statement, in each such case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities and such other matters as the Holder may reasonably request and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements; (f) immediately notify the Holder in writing (i) at any time when a prospectus relating to a registration hereunder is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) of any request by the Commission or any other regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or other document relating to such offering, and in either such case (i) or (ii) at the request of the Holder prepare and furnish to the Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to 7 13 McDonough of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they are made, not misleading; (g) use its best efforts to list all such Registrable Securities covered by such registration statement on each securities exchange and inter-dealer quotation system on which a class of common equity securities of the Company is then listed, and to pay all fees and expenses in connection therewith; and (h) upon the transfer of shares by the Holder in connection with a registration hereunder, furnish unlegended certificates representing ownership of the Registrable Securities being sought in such denominations as shall be requested by the Holder or the underwriters. 8. INDEMNIFICATION. (a) BY THE COMPANY. The Company will indemnify the Holders, their respective officers, directors, partners, legal counsel and accountants, and each person controlling any Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated under the Securities Act applicable to the Company in connection with any such registration, qualification or compliance, and the Company will reimburse the Holder, its officers, directors and partners, each person controlling the Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by the Holder, controlling person or underwriter and stated to be specifically for use therein. If the Holder is represented by counsel other than counsel for the Company, the Company will not be obligated under this Section 8(a) to reimburse legal fees and expenses of more than one separate counsel for the Holder. 8 14 (b) BY THE HOLDER. The Holder will indemnify the Company, its directors, officers, legal counsel, accountants, each underwriter, if any, of the Company's securities covered by such a registration statement, and each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such directors, officers, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by the Holder and stated to be specifically for use therein. Notwithstanding the foregoing, the liability of the Holder under this subsection (b) shall be limited in an amount equal to the net proceeds of the shares sold by the Holder, unless such liability arises out of or is based on willful misconduct by the Holder. (c) PROCEDURE FOR INDEMNIFICATION. Each party indemnified under paragraph (a) or (b) of this Section 8 (the "INDEMNIFIED PARTY") shall, promptly after receipt of notice of any claim or the commencement of any action against such Indemnified Party in respect of which indemnity may be sought, notify the party required to provide indemnification (the "INDEMNIFYING PARTY") in writing of the claim or the commencement thereof; provided that the failure of the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which it may have to an Indemnified Party on account of the indemnity agreement contained in paragraph (a) or (b) of this Section 8, unless the Indemnifying Party was materially prejudiced by such failure, and in no event shall relieve the Indemnifying Party from any other liability which it may have to such Indemnified Party. If any such claim or action shall be brought against an Indemnified Party, it shall notify the Indemnifying Party thereof and the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable (except to the extent the proviso to this sentence is applicable, in which event it will be so liable) to the Indemnified Party under this Section 8 for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided that each Indemnified Party shall have the right to employ separate counsel to represent it and assume its defense (in which case, the Indemnifying Party shall not represent it) if (i) upon the advice of counsel, the representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, or (ii) in the event the Indemnifying Party has not assumed the defense thereof within ten (10) days of receipt of notice of such 9 15 claim or commencement of action, and in which case the fees and expenses of one such separate counsel shall be paid by the Indemnifying Party. If any Indemnified Party employs such separate counsel it will not enter into any settlement agreement which is not approved by the Indemnifying Party, such approval not to be unreasonably withheld. If the Indemnifying Party so assumes the defense thereof, it may not agree to any settlement of any such claim or action as the result of which any remedy or relief, other than monetary damages for which the Indemnifying Party shall be responsible hereunder, shall be applied to or against the Indemnified Party, without the prior written consent of the Indemnified Party. In any action hereunder as to which the Indemnifying Party has assumed the defense thereof with counsel reasonably satisfactory to the Indemnified Party, the Indemnified Party shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but, except as set forth above, the Indemnifying Party shall not be obligated hereunder to reimburse the Indemnified Party for the costs thereof. If the indemnification provided for in this Section shall for any reason be unavailable to an Indemnified Party in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability, or action in respect thereof, in such proportion as shall be appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party on the one hand or the Indemnified Party on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission, but not by reference to any Indemnified Party's stock ownership in the Company. In no event, however, shall the Holder of Registrable Securities be required to contribute in excess of the amount of the net proceeds received by the Holder in connection with the sale of Registrable Securities in the offering which is the subject of such loss, claim, damage or liability. The amount paid or payable by an Indemnified Party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this paragraph shall be deemed to include, for purposes of this paragraph, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 9. INFORMATION FROM THE HOLDERS. Notwithstanding any provision contained herein to the contrary, it shall be a condition precedent to the obligation of the Company to take any action pursuant to this Agreement in respect of the Registrable Securities that are to be registered at the request of any Holder thereof that (i) such Holder furnish to the Company such information regarding the Holder as shall be necessary to enable the Company to 10 16 comply with the provisions hereof in connection with any registration, qualification or compliance referred to in this Agreement, and (ii) such Holder deliver and perform under any underwriting and selling shareholder agreements as may be reasonably requested by the underwriters. 10. RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission that may at any time permit the sale of the Restricted Securities to the public without registration, after such time as a public market exists for the Common Stock of the Company, the Company agrees to use its best efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (c) Furnish to any Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration. 11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to register securities granted Holder under Section 2, Section 3 or Section 4 may be assigned in connection with any transfer or assignment by the Holder of Registrable Securities provided that: (a) such transfer may otherwise be effected in accordance with applicable securities laws; (b) such transfer is effected in compliance with the restrictions on transfer contained in this Agreement and in any other agreement between the Company and the Holder; and (c) such assignee or transferee acquires at least 10% of the Registrable Securities then outstanding and shall execute a counterpart of this Agreement whereby such assignor or transferee agrees to be bound by the terms of this Agreement and assumes all of the obligations of the transferring Holder hereunder. No transfer or assignment will divest the Holder or any subsequent owner of such rights and powers unless all Registrable Securities are transferred or assigned. 12. TERMINATION. This Agreement shall terminate at such time as all Registrable Securities held by the Holders constitute less than one percent (1%) of the voting securities of the Company (on an as-converted basis) and can be sold pursuant to Rule 144, other than 11 17 Rule 144(k), within a consecutive three (3) month period without compliance with the registration requirements of the Securities Act. The respective indemnities, representations and warranties of the McDonough and the Company shall survive such termination. 13. MARKET STAND-OFF. If requested by an underwriter of securities of the Company, each Holder of Registrable Securities shall not sell or otherwise transfer or dispose of any Registrable Securities held by such Holder during the one-hundred twenty (120) day period following the effective date of a registration statement; provided, however, that such agreement shall apply only to the first registration statement covering the offered securities to be sold on the Company's behalf to the public in an underwritten offering. 14. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the State of California without given effect to the conflicts of law principles thereof. (b) AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holder of at least 85% of the Registrable Securities, voting as a class. Any amendment or waiver effected in accordance with this paragraph will be binding upon the Company, each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), and any transferee of such securities. (c) SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, invalid, unenforceable or void, this Agreement shall continue in full force and effect without said provision. In such event, the parties shall negotiate, in good faith, a legal, valid and binding substitute provision which most nearly effects the intent of the parties in entering into this Agreement. (d) NOTICES. All notices and other communications required or permitted hereunder shall be in writing (or in the form of a telex or telecopy (confirmed in writing) to be given only during the recipient's normal business hours unless arrangements have otherwise been made to receive such notice by telex or telecopy outside of normal business hours) and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telex-or telecopy (as provided above) addressed (a) if to the McDonough, at such address as the McDonough shall have furnished to the Company in writing or (b) if to the Company, one copy should be sent to its principal executive offices and addressed to the attention of the Corporate Secretary, or at such other address as the Company shall have furnished to the McDonough. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered 12 18 personally or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if by telex or telecopy pursuant to the above, when received. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. (f) CAPTIONS. The section captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 13 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. REMEDYTEMP, INC. By: ________________________________________ Name:_______________________________________ Its:________________________________________ ___________________________________________ Robert E. McDonough, Sr. 14 EX-10.2 3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement ("Agreement") is entered into effective January 7, 1998 by and between REMEDYTEMP, INC., a California corporation (the "Company"), and Paul W. Mikos, an individual person ("Mikos"), (collectively referred to herein as the "Parties"). WHEREAS, an Employment Agreement was entered into effective May 1, 1996 by and between the Company and Mikos (the "Original Agreement"); WHEREAS, this Agreement has been prepared to amend and restate the Original Agreement pursuant to the approval, direction and authorization of the Leadership Development and Compensation Committee of the Board of Directors of the Company (the "Compensation Committee"); and WHEREAS, the Company desires to maintain the benefits of having Mikos continue to serve as its President and Chief Executive Officer and Mikos desires to be employed by the Company as President and Chief Executive Officer. NOW, THEREFORE, in consideration of the foregoing promises and mutual covenants, the Parties hereby amend and restate the Original Agreement and agree to the following terms and conditions under which Mikos will serve as the Company's Chief Executive Officer and President: 1. EMPLOYMENT SERVICES AND DUTIES The Company agrees to employ and retain the services of Mikos as its President and Chief Executive Officer, and Mikos hereby agrees to be employed by the Company as its President and Chief Executive Officer. Mikos's duties and obligations as President and Chief Executive Officer shall be: (i) to implement the policies determined by the Board of Directors of the Company; (ii) to generally manage the day-to-day business of the Company; and (iii) to prepare the Company for public offerings of its stock. Mikos agrees to perform his duties faithfully, to the best of his ability and in the best interests of the Company, to preserve and protect the confidential information of the Company, and to perform both his regular duties and strategic projects as requested by the Board of Directors. As President and Chief Executive Officer, Mikos shall report directly to the Company's Board of Directors. 2. TERM OF EMPLOYMENT Subject to the terms and conditions of this Agreement, the Company agrees to employ, and Mikos agrees to serve as President and Chief Executive Officer of the Company for three (3) years commencing on May 1, 1996 and ending on May 1, 1999 (the "Employment Period"). 3. COMPENSATION TERMS The Company agrees to compensate Mikos for his services rendered as President and Chief Executive Officer under this Agreement as follows: (a) Mikos shall receive a base salary set annually by the Compensation Committee; provided, however that Mikos's annual base salary shall not be less than $390,000 per year, payable semi-monthly. In addition, Mikos shall be entitled to 2 earn an annual performance bonus in an amount to be determined by the Compensation Committee based on Mikos's satisfaction of certain performance goals set annually by the Compensation Committee. The amount of the annual bonus paid to Mikos shall not exceed 100% of his base salary in any particular year. (b) During the Employment Period, Mikos shall be entitled to and shall receive the same employee benefits package that Mikos received as an executive officer of the Company immediately prior to the date of this Agreement, including, without limitation, all health, life and disability insurance and all policies or agreements providing for indemnification. 4. TERMINATION AND SEVERANCE PACKAGE The Board of Directors of the Company may terminate Mikos's employment with the Company, with or without cause, at any time upon notice to Mikos. Mikos may terminate his employment with the Company at any time upon notice to the Company's Board of Directors. Upon the termination by the Company of Mikos's employment with the Company, the Company shall offer Mikos the following severance package; provided Mikos agrees to the following terms: (a) For a period of two (2) years after his termination, Mikos shall receive an annual compensation of Three Hundred Ninety Thousand Dollars ($390,000) per year, payable semi-monthly (the "Severance Payments"). (b) In consideration for the agreements set forth herein and the Severance Payments, Mikos shall, upon the termination of his employment, execute a release of the Company, the Board of Directors of the Company, and all officers, employees and agents of the Company from any and all claims, liabilities, actions, causes of action, obligations, costs, damages, losses and demands of every kind and nature whatsoever known or unknown, which arise out of, relate to or are in any manner whatsoever connected with any action, transaction, occurrence or event which has occurred prior to the date of the release and those which may arise out of or are in any manner whatsoever connected with or related to the termination of Mikos's employment with the Company. Such release shall include a waiver of all rights granted under Section 1542 of the California Civil Code which reads as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which, if known by him must have materially affected his settlement with the debtor. Cal. Civ. Code Section 1542. (c) In consideration of the agreements set forth herein and the Severance Payments, Mikos agrees that upon termination of his employment with the Company he shall resign as a Director of the Board of Directors of the Company. 5. NONDISCLOSURE Mikos shall at all times keep confidential and maintain the confidentiality of all proprietary information, confidential information, and/or trade secrets of the Company, including but not limited to customer lists, the EDGE system, HPT, and IntelliSearch ("Proprietary Information"), and shall not, unless the Company's prior written consent is obtained, at any time after the date hereof, either directly or indirectly, use any Proprietary Information for his own benefit, or in competition with, or to the detriment of the Company, or divulge, disclose, or communicate any Proprietary Information to any person or entity in any manner whatsoever, except to employees or agents of the Company having a need to know such Proprietary Information, and only to the extent necessary to perform his responsibilities on behalf of the Company. In addition, 2 3 for a period of two (2) years after the termination of his employment with the Company, Mikos shall not solicit employees or customers of the Company in any geographical location where the Company conducts business. 6. REGISTRATION EXPENSES To the extent that Mikos is permitted to sell stock in the Company owned by him individually or in a fiduciary capacity (collectively, the "Mikos Stock") in a public offering of stock by the Company, all expenses incurred in effecting any registration of such Mikos Stock, including, all registration and filing fees, printing expenses, expenses of compliance with blue sky laws, fees and disbursements of counsel for the Company, expenses of any audits incidental to or required by any such registration, and expenses of all marketing and promotional efforts requested by the managing underwriter shall be borne by the Company; provided, however, that Mikos shall bear underwriting discounts and/or brokerage fees and commissions relating to the sale of the Mikos Stock. 7. SEVERABILITY The provisions of this Agreement are severable. If a court of competent jurisdiction determines that any one or more provisions of this Agreement is invalid, void or unenforceable, in whole or in part, it will be severed therefrom. The remaining provisions of this Agreement shall then continue in full force without being impaired or invalidated in any way. 8. NO ASSIGNMENT The parties acknowledge and agree that this Agreement is personal in nature and may not be assigned by Mikos. 9. ENTIRE AGREEMENT This Agreement constitutes the entire understanding between the parties concerning the subject matter hereof. This Agreement supersedes all negotiations, prior discussions and preliminary agreements. This Agreement may not be amended except in a writing executed by the parties. 10. GOVERNING LAW AND ARBITRATION This Agreement shall be governed by and construed in accordance with the laws of the State of California and the parties agree that the venue for the resolution of all disputes hereunder shall be in the appropriate courts in the County of Orange, California. 11. NOTICES All notices, requests, demands and other communication required or contemplated under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or when enclosed in a properly sealed and addressed envelope, registered or certified, and deposited (postage prepaid) in a post office or branch post office regularly maintained by the United States Government. Any notice given to the Company under the terms of this Agreement shall be addressed to the Company at the address of its principal place of business. Any notice to be given to Mikos shall be addressed to him at his home address last shown on the Company's records, or at such other address as either party may hereafter designate in writing to the other. 3 4 IN WITNESS WHEREOF, the parties have duly executed this Agreement effective as of January 7, 1998. REMEDYTEMP, INC., a California Corporation By:___________________________ Name:________________________ Its:___________________________ ------------------------------ Paul W. Mikos 4 EX-27.1 4 FINANCIAL DATA SCHEDULE
5 3-MOS OCT-03-1999 SEP-28-1998 DEC-27-1998 2,382 0 66,457 0 0 74,447 16,923 0 96,046 32,185 0 0 0 89 63,761 96,046 0 119,826 0 90,806 23,111 0 0 6,142 2,457 3,685 0 0 0 3,685 0.41 0.41
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