-----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, AfKWSumf8nRo0RqtQzlhI/hACwsWWxNCfnwgH2YSoIS/oMIxoHtIq6Kbfd3IStHE 99odr7DELxGRa+BleK2+6g== 0000950134-99-007349.txt : 19990816 0000950134-99-007349.hdr.sgml : 19990816 ACCESSION NUMBER: 0000950134-99-007349 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAFFMARK INC CENTRAL INDEX KEY: 0001017968 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 710788538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20971 FILM NUMBER: 99687889 BUSINESS ADDRESS: STREET 1: 302 EAST MILLSAP CITY: FAYETTEVILLE STATE: AR ZIP: 72703 BUSINESS PHONE: 5019736000 MAIL ADDRESS: STREET 1: 302 EAST MILLSAP CITY: FAYETTEVETTE STATE: AR ZIP: 72703 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1999 [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the transition period from _______ to ________ COMMISSION FILE NUMBER: 0-20971 STAFFMARK, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 71-0788538 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 234 EAST MILLSAP ROAD FAYETTEVILLE, AR 72703 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (501) 973-6000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of Common Stock of the Registrant, par value $.01 per share, outstanding at August 13, 1999 was 29,300,192. 2 STAFFMARK, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 INDEX
INDEX ----- PART I -- FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS StaffMark, Inc. Consolidated Financial Statements Consolidated Statements of Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction 11 Results for the Three and Six Months Ended June 30, 1999 Compared to Results for the Three and Six Months Ended June 30, 1998 11 Liquidity and Capital Resources 13 Year 2000 Compliance 14 Foreign Currency Translation 15 Special Note Regarding Forward Looking Statements 15 ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16 PART II - OTHER INFORMATION ITEM 1 -- LEGAL PROCEEDINGS 16 ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS 17 ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17 ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K 18 (a) Exhibits (b) Reports on Form 8-K SIGNATURES 18
2 3 STAFFMARK, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- SERVICE REVENUES $304,272 $243,155 $584,584 $457,706 COST OF SERVICES 226,017 177,875 437,384 337,512 -------- -------- -------- -------- Gross profit 78,255 65,280 147,200 120,194 -------- -------- -------- -------- OPERATING EXPENSES: Selling, general and administrative 51,742 41,677 102,255 81,073 Depreciation and amortization 5,314 3,169 10,130 5,987 Nonrecurring merger costs -- 1,121 -- 1,121 -------- -------- -------- -------- Operating income 21,199 19,313 34,815 32,013 -------- -------- -------- -------- OTHER EXPENSE: Interest expense 4,199 1,193 7,503 1,872 Other, net 189 50 237 50 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 16,811 18,070 27,075 30,091 PROVISION FOR INCOME TAXES 6,052 7,049 9,909 11,863 -------- -------- -------- -------- NET INCOME $ 10,759 $ 11,021 $ 17,166 $ 18,228 ======== ======== ======== ======== BASIC EARNINGS PER SHARE $ 0.37 $ 0.39 $ 0.59 $ 0.64 ======== ======== ======== ======== DILUTED EARNINGS PER SHARE $ 0.37 $ 0.37 $ 0.58 $ 0.62 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 3 4 STAFFMARK, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DECEMBER 31, 1999 1998 ---------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,656 $ 12,812 Accounts receivable, net 185,456 155,796 Prepaid expenses and other 13,308 10,063 Deferred income taxes 3,169 2,569 --------- --------- Total current assets 211,589 181,240 PROPERTY AND EQUIPMENT, net 27,345 22,450 INTANGIBLE ASSETS, net 434,599 375,682 OTHER ASSETS 2,040 1,573 --------- --------- $ 675,573 $ 580,945 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued liabilities $ 36,656 $ 35,068 Payroll and related liabilities 41,693 40,309 Reserve for workers' compensation claims 8,416 8,087 Income taxes payable 5,599 3,318 --------- --------- Total current liabilities 92,364 86,782 LONG TERM DEBT 271,030 176,700 OTHER LONG TERM LIABILITIES 22,000 47,737 DEFERRED INCOME TAXES 13,003 9,634 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; no shares issued or outstanding -- -- Common stock, $.01 par value; 29,220,685 and 29,083,379 shares issued and outstanding as of June 30, 1999 and December 31, 1998 292 291 Paid-in capital 215,894 214,271 Retained earnings 63,438 46,263 Accumulated other comprehensive income (2,448) (733) --------- --------- Total stockholders' equity 277,176 260,092 --------- --------- $ 675,573 $ 580,945 ========= =========
The accompanying notes are an integral part of these balance sheets. 4 5 STAFFMARK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ---------------------- 1999 1998 1999 1998 --------- --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,759 $ 11,021 $ 17,166 $ 18,228 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 5,314 3,169 10,130 5,987 Provision for bad debts 400 889 567 1,254 Deferred income taxes 1,489 (743) 3,137 (1,560) Effect of compensatory stock options -- (1,211) -- (39) Change in operating assets and liabilities, net of acquisitions: Accounts receivable (13,289) (10,527) (24,192) (20,691) Prepaid expenses and other (2,184) 593 (2,964) 408 Other assets (726) 799 (852) 2,002 Accounts payable and other accrued liabilities 15,831 (4,773) 12,479 (1,352) Payroll and related liabilities (6,605) 122 616 5,690 Payment of nonrecurring merger expenses (4,575) -- (13,633) -- Reserve for workers' compensation claims (401) 424 40 364 Income taxes payable 1,881 (1,770) 1,919 249 Other long term liabilities (19) 9,013 (566) (1,830) Other, net 49 (86) (382) 164 --------- --------- --------- --------- Net cash provided by operating activities 7,924 6,920 3,465 8,874 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (21,555) (62,771) (93,195) (99,621) Capital expenditures (3,449) (2,936) (6,444) (6,324) --------- --------- --------- --------- Net cash used in investing activities (25,004) (65,707) (99,639) (105,945) --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 78,810 95,415 246,990 142,200 Payments on borrowings (61,080) (34,290) (152,660) (41,640) Proceeds from stock purchase plan and stock option 40 386 988 528 Deferred financing costs (66) (295) (585) (571) --------- --------- --------- --------- Net cash provided by financing activities 17,704 61,216 94,733 100,517 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 624 2,429 (1,441) 3,446 Effect of foreign currency translation on cash and cash equivalents (324) (1,926) (1,715) (657) CASH AND CASH EQUIVALENTS, beginning of period 9,356 8,941 12,812 6,655 --------- --------- --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 9,656 $ 9,444 $ 9,656 $ 9,444 ========= ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 3,641 $ 909 $ 6,738 $ 1,344 ========= ========= ========= ========= Income taxes paid $ 4,981 $ 8,210 $ 6,337 $ 11,153 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 5 6 STAFFMARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION: We (StaffMark, Inc. and our subsidiaries) are an international provider of diversified staffing, information technology ("IT"), professional, consulting and solutions services to businesses, professional and service organizations and governmental agencies. Revenues are recognized upon the performance of services. We generally compensate our associates and consultants only for hours actually worked and, therefore, wages of associates and consultants are a variable cost that increase or decrease as revenues increase or decrease. However, we do have associates and consultants that are full-time, salaried employees who are paid even when not engaged in staffing or consulting. Cost of services primarily consists of wages paid to associates and consultants, payroll taxes, workers' compensation, foreign statutory taxes, national insurance and other related employee benefits. Selling, general and administrative expenses are comprised primarily of administrative salaries and benefits, marketing, rent, recruitment, training, IT systems and communications expenses. As of June 30, 1999, we operated over 320 offices in 32 states and 14 countries and provide staffing in the Commercial and Professional/Information Technology ("Professional/IT") service lines. We extend trade credit to customers representing a variety of industries. There are no individual customers that account for more than 5% of our service revenues in any of the periods presented. 2. BASIS OF PRESENTATION: The accompanying interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to ensure the information presented is not misleading. The accompanying interim financial statements reflect all adjustments (which were of a normal, recurring nature) that, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows as of and for the interim periods presented. All significant intercompany transactions have been eliminated in the accompanying consolidated financial statements. Additionally, certain reclassifications have been made to prior period balances in order to conform with the current period presentation. These financial statements should be read in conjunction with our audited financial statements and notes thereto included in our 1998 Annual Report on Form 10-K as filed with the Commission on March 16, 1999. 3. SEASONALITY: The timing of certain holidays, weather conditions and seasonal vacation patterns can cause our results of operations to fluctuate. We generally expect to realize higher revenues, operating income and net income during the second and third quarters and relatively lower revenues, operating income and net income during the first and fourth quarters. Accordingly, the results of operations for an interim period are not necessarily indicative of the results of operations for a full fiscal year. 6 7 4. BUSINESS COMBINATIONS: During the second quarter of 1999, we acquired Edgewater Technology, Inc., a developer of custom electronic commerce software solutions. The accompanying balance sheet as of June 30, 1999 includes preliminary allocations of the respective purchase price and is subject to final adjustment. The excess of purchase price over net assets acquired has been included in intangible assets and is being amortized over a period of 30 years. On November 25, 1998, we completed our acquisition of Robert Walters plc ("Robert Walters"). In connection with the acquisition, each outstanding share of Robert Walters common stock was converted into the right to receive 0.272 shares of StaffMark's common stock, totaling 6,687,704 common shares in the aggregate. The merger has been accounted for as a pooling-of-interests. Accordingly, the accompanying consolidated financial statements have been restated to include the accounts of Robert Walters for all periods presented. In addition to Robert Walters, we acquired 17 staffing and professional service companies during 1998. The 1998 acquisitions of Strategic Legal Resources, Inc., and Progressive Personnel Resources, Inc. were considered significant. We have also included certain financial information in the tables below from our acquisition of the staffing business of WorldTec Group International, Inc. in the fourth quarter of 1998. These 1998 acquisitions are referred to as "the Acquisitions." The unaudited consolidated results of operations on a pro forma basis as though the Acquisitions had been acquired as of the beginning of 1998 are presented below. Note that the pro forma information presented below does not reflect the reductions in salaries that certain owners of the Acquisitions agreed to and does not reflect any nonrecurring merger costs incurred in connection with several of our pooling-of-interests transactions. The remaining 1998 acquisitions were not individually significant and, therefore, have not been included in the following pro forma presentation. We believe this information reflects all adjustments necessary for a fair presentation of results for the interim periods. The pro forma results of operations for the three and six months ended June 30, 1999 and 1998 are not necessarily indicative of the results to be expected for the full year.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, (IN THOUSANDS) 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Revenue $ 304,272 $ 264,789 $ 584,584 $ 504,905 =========== =========== =========== =========== Net income $ 10,759 $ 11,463 $ 17,166 $ 18,327 =========== =========== =========== =========== Basic earnings per share $ 0.37 $ 0.40 $ 0.59 $ 0.64 =========== =========== =========== =========== Diluted earnings per share $ 0.37 $ 0.38 $ 0.58 $ 0.61 =========== =========== =========== ===========
Consideration paid with respect to acquisitions during the six months ended June 30, 1999 includes cash consideration paid for companies acquired in the current period, as well as contingent consideration paid to the former owners of companies acquired in previous periods. The aggregate consideration related to these payments consisted of $93.2 million in cash and 0.2 million shares of common stock. 7 8 5. MERGER AND INTEGRATION EXPENSES: During the fourth quarter of 1998, we recorded merger and integration expenses totaling approximately $24.6 million that relate to the merger with Robert Walters and other pooling-of-interests transactions completed during 1998. Included in these costs are approximately $13.3 million for professional and financial advisors' fees, approximately $10.8 million related to integration expenses and approximately $500,000 for severance and employee-related expenses. Integration expenses consist primarily of costs related to office closings and contract terminations pursuant to management's plan of integration, which is expected to be completed by September 1999. Substantially all costs associated with severance had been incurred as of December 31, 1998. The following is a summary of our merger and integration accrual:
(IN THOUSANDS) Total merger and integration expenses $ 24,626 Cash outlays (22,894) -------- Accrual at June 30, 1999 $ 1,732 ========
6. EARNINGS PER COMMON SHARE: A reconciliation of net income and weighted average shares used in computing basic and diluted earnings per share is as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, (IN THOUSANDS EXCEPT PER SHARE DATA) 1999 1998 1999 1998 ------- ------- ------- ------- BASIC EARNINGS PER SHARE: Net income applicable to common shares $10,759 $11,021 $17,166 $18,228 ======= ======= ======= ======= Weighted average common shares outstanding 29,174 28,579 29,211 28,269 ======= ======= ======= ======= Basic earnings per share of common stock $ 0.37 $ 0.39 $ 0.59 $ 0.64 ======= ======= ======= ======= DILUTED EARNINGS PER SHARE: Net income applicable to common shares $10,759 $11,021 $17,166 $18,228 ======= ======= ======= ======= Weighted average common shares outstanding 29,174 28,579 29,211 28,269 Dilutive effect of stock options 170 1,322 228 1,232 ------- ------- ------- ------- Weighted average common shares including dilutive effect of stock options 29,344 29,901 29,439 29,501 ======= ======= ======= ======= Diluted earnings per share of common stock $ 0.37 $ 0.37 $ 0.58 $ 0.62 ======= ======= ======= =======
Excluding the nonrecurring merger costs of approximately $1.1 million that were expensed during the second quarter of 1998 relating to several of our pooling-of-interests transactions, basic and diluted earnings per share were $0.41 and $0.39, respectively, for the three months ended June 30, 1998 and basic and diluted earnings per share were $0.67 and $0.64, respectively, for the six months ended June 30, 1998. 8 9 Options to purchase approximately 2.4 million shares of common stock at prices ranging from $9.94 to $40.75 per share were outstanding during the three months ended June 30, 1999, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of our common shares. These options, which expire ten years from the date of grant, were still outstanding as of June 30, 1999. 7. COMPREHENSIVE INCOME: Comprehensive income was as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, (IN THOUSANDS) 1999 1998 1999 1998 -------- -------- -------- -------- Net income $ 10,759 $ 11,021 $ 17,166 $ 18,228 Other comprehensive income: Change in cumulative foreign currency translation adjustments (324) (1,926) (1,715) (657) -------- -------- -------- -------- Total comprehensive income $ 10,435 $ 9,095 $ 15,451 $ 17,571 ======== ======== ======== ========
8. SEGMENT INFORMATION: In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise and Related Information," which requires reporting segment information consistent with the way management internally disaggregates an entity's operations to assess performance and to allocate resources. As required, we have adopted the provisions of SFAS No. 131 and have presented below the required segment information for the three months ended June 30, 1999 and 1998. We segment our operations based upon differences in services. Our Commercial segment provides clerical and light industrial staffing services in the United States. Our Professional/IT segment provides staffing, consulting, technical and support services primarily in the areas of finance, accounting, information technology and legal services in the United States, the United Kingdom, Australia and ten other foreign countries. The "corporate" column includes general corporate expenses, headquarters facilities and equipment, internal-use software, and other expenses not allocated to the segments. The accounting policies used in measuring segment assets and operating results are the same as those described in Note 2 to our audited financial statements and notes thereto included in our 1998 Annual Report on Form 10-K as filed with the Commission on March 16, 1999. We evaluate performance of the segments based on segment operating income, excluding corporate overhead, nonrecurring and unusual items. We do not have any significant intersegment sales or transfers. The results of the business segments as of and for the three and six months ended June 30, 1999 and 1998 are as follows: 9 10
PROFESSIONAL/ INFORMATION CONSOLIDATED (IN THOUSANDS) TECHNOLOGY COMMERCIAL CORPORATE TOTALS ------------- ---------- --------- ------------ THREE MONTHS ENDED JUNE 30, 1999 Total service revenues $154,192 $150,080 $ -- $304,272 Operating income 15,273 10,081 (4,155) 21,199 Depreciation and amortization 3,157 1,741 416 5,314 Capital expenditures 820 644 1,985 3,449 Total assets 408,394 204,513 62,666 675,573 THREE MONTHS ENDED JUNE 30, 1998 Total service revenues $130,665 $112,490 $ -- $243,155 Operating income 13,930 9,236 (3,853) 19,313 Depreciation and amortization 2,102 847 220 3,169 Capital expenditures 644 522 1,770 2,936 Total assets 286,258 137,296 52,687 476,241 SIX MONTHS ENDED JUNE 30, 1999 Total service revenues $299,924 $284,660 $ -- $584,584 Operating income 24,344 17,370 (6,899) 34,815 Depreciation and amortization 6,020 3,354 756 10,130 Capital expenditures 1,355 1,545 3,544 6,444 SIX MONTHS ENDED JUNE 30, 1998 Total service revenues $251,052 $206,654 $ -- $457,706 Operating income 22,511 15,645 (6,143) 32,013 Depreciation and amortization 3,838 1,611 538 5,987 Capital expenditures 2,334 732 3,258 6,324
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, REVENUES BY COUNTRY 1999 1998 1999 1998 -------- -------- -------- -------- United States $235,032 $181,864 $446,745 $339,846 United Kingdom 52,953 48,126 106,849 91,634 Australia 12,591 10,359 24,186 20,940 Other 3,696 2,806 6,804 5,286 -------- -------- -------- -------- Total revenues $304,272 $243,155 $584,584 $457,706 ======== ======== ======== ========
AT JUNE 30, PROPERTY AND EQUIPMENT BY COUNTRY 1999 1998 ------- ------- United States $23,218 $14,947 United Kingdom 2,734 3,411 Australia 488 582 Other 904 877 ------- ------- Total property and equipment $27,344 $19,817 ======= =======
10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The information below discusses the results of operations for the three and six months ended June 30, 1999 as compared to the results of operations for the three and six months ended June 30, 1998. Our services are provided through two segments: Professional/IT and Commercial. The Professional/IT segment provides staffing, consulting, technical support and solutions services primarily in the areas of finance, accounting, information technology, and legal services. The Commercial segment provides clerical and light industrial staffing services. Our services are provided through our network of over 320 offices located in 32 states and 14 countries including, but not limited to, the United States, the United Kingdom, Australia, Germany, New Zealand, Belgium, the Netherlands, Singapore, and South Africa. Revenues are recognized upon the performance of services. We generally compensate our associates and consultants only for hours actually worked and, therefore, wages of associates and consultants are a variable cost that increase or decrease as revenues increase or decrease. However, we do have associates and consultants that are full-time, salaried employees who are paid even when not engaged in staffing or consulting. Cost of services primarily consists of wages paid to associates and consultants, payroll taxes, workers' compensation, foreign statutory taxes, national insurance and other related employee benefits. Selling, general and administrative expenses are comprised primarily of administrative salaries and benefits, marketing, rent, recruitment, training, IT systems and communications expenses. Earnings before interest, taxes, depreciation and amortization ("EBITDA") are included in the following discussion because we believe the period-to-period change in EBITDA is a meaningful measure due principally to the role acquisitions have played in our development and because the non-cash expenses of depreciation and amortization have a significant impact on operating income and operating margins. EBITDA should not be construed as an alternative measure to net income or cash flows from operations as determined by generally accepted accounting principles as EBITDA excludes certain significant costs of doing business. The EBITDA per share information that follows has been calculated using diluted shares outstanding for the relevant period. The financial information provided below has been rounded in order to simplify its presentation. The percentages and amounts below have been calculated using the detailed financial information contained in the financial statements, the notes thereto and the other financial data included in this Quarterly Report on Form 10-Q. RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 Revenues. Consolidated revenues increased $61.1 million, or 25.1%, to $304.3 million for the three months ended June 30, 1999 compared to $243.2 million for the three months ended June 30, 1998. Consolidated revenues increased $126.9 million, or 27.7%, to $584.6 million for the six months ended June 30, 1999 compared to $457.7 million for the six months ended June 30, 1998. The purchase acquisitions completed during 1998 in both the Professional/IT and Commercial segments accounted for approximately $29.9 million and $68.0 million of the increase for the three and six months ended June 30, 1999, respectively. The purchase acquisitions completed during the six months ended June 30, 1999 accounted for approximately $9.2 million and $13.4 million of the increase for the three and six months ended June 30, 1999, respectively. Revenues for the Professional/IT segment increased $23.5 million, or 18.0%, to $154.2 million for the three months ended June 30, 1999 compared to $130.7 million for three months ended June 30, 1998. Revenues for the Professional/IT segment increased $48.9 million, or 19.5%, to $299.9 million for the six months ended June 30, 1999 compared to $251.1 million for six months ended June 30, 1998. This increase is primarily the result of acquisitions and internal growth particularly in the expansion of contracting professional and information technology consultants in the United Kingdom and other European locations, as well as in Australia and certain Asian markets. 11 12 Approximately $4.4 million and $11.5 million of the increase for the three and six months ended June 30, 1999, respectively, results from the full period's operations of the companies purchased during 1998. The purchase acquisitions completed during the six months ended June 30, 1999 accounted for approximately $10.2 million and $15.5 million of the increase for the three and six months ended June 30, 1999, respectively. Revenues for the Commercial segment increased $37.6 million, or 33.4%, to $150.1 million for the three months ended June 30, 1999 compared to $112.5 million for three months ended June 30, 1998. Revenues for the Commercial segment increased $78.0 million, or 37.7%, to $284.7 million for the six months ended June 30, 1999 compared to $206.7 million for six months ended June 30, 1998. This revenue growth is the result of acquisitions and internal growth. Commercial companies purchased during 1998 accounted for $28.1 million and $62.1 million of the change for the three and six months ended June 30, 1999, respectively. No Commercial acquisitions have been made during the six months ended June 30, 1999. Gross Profit and EBITDA. For the three months ended June 30, 1999, gross profit as a percentage of revenue decreased from 26.8% to 25.7% while selling, general and administrative expenses ("SG&A") as a percentage of revenue decreased from 17.1% to 17.0%. Note that SG&A for the three months ended June 30, 1998 were partially reduced by compensatory stock option income that was recorded for Robert Walters. Excluding these nonrecurring costs, SG&A as a percentage of revenue was 17.6% for the three months ended June 30, 1998. For the six months ended June 30, 1999, gross profit as a percentage of revenue decreased from 26.3% to 25.2% while SG&A as a percentage of revenue decreased from 17.7% to 17.5%. EBITDA increased $4.0 million, or 17.9%, to $26.5 million for the three months ended June 30, 1999 as compared to $22.5 million for the three months ended June 30, 1998. EBITDA increased $6.9 million, or 18.3%, to $44.9 million for the six months ended June 30, 1999 as compared to $38.0 million for the six months ended June 30, 1998. EBITDA as a percentage of revenues was 8.7% and 7.7% for the three and six months ended June 30, 1999, respectively, and 9.2% and 8.3% for the three and six months ended June 30, 1998, respectively. The decrease in gross margin and EBITDA margin is primarily the result of: (1) a decrease in permanent placements as a percentage of revenue for the three and six months ended June 30, 1999 as compared to the three and six months ended June 30, 1998; (2) the higher growth rates in the international IT staffing sector which have lower margins than the domestic IT staffing sector; and (3) the growth of our strategic alliance relationships in the commercial segment which have lower gross margins than traditional temporary staffing services Depreciation and Amortization Expense. Depreciation and amortization expense increased $2.1 million, or 67.7%, to $5.3 million for the three months ended June 30, 1999 as compared to $3.2 million for the three months ended June 30, 1998. Depreciation and amortization expense increased $4.1 million, or 69.2%, to $10.1 million for the six months ended June 30, 1999 as compared to $6.0 million for the six months ended June 30, 1998. This increase is primarily attributable to amortization of goodwill associated with our purchase business combinations. Depreciation increased as a result of continuing development of our corporate infrastructure and information systems network, as well as assets acquired in acquisitions. Operating Income. Operating income increased $1.9 million, or 9.8%, to $21.2 million for the three months ended June 30, 1999 compared to $19.3 million for the same period last year and increased $2.8 million, or 8.8%, to $34.8 million for the six months ended June 30, 1999 compared to $32.0 million for the six months ended June 30, 1998. Operating margin was 7.0% and 6.0% for the three and six months ended June 30, 1999, respectively, as compared to 7.9% and 7.0% for the three and six months ended June 30, 1998, respectively. Operating income increased as a result of higher revenues while the operating margin declined due to lower gross profit and higher depreciation and amortization expense as discussed above. The following operating income discussion at the Professional/IT and Commercial segment levels excludes unallocated corporate SG&A of $4.2 million and $6.9 million for the three and six months ended June 30, 1999, respectively, and $3.9 million and $6.1 million for the three and six months ended June 30, 1998, respectively. Operating income for the Professional/IT segment increased $1.3 million, or 9.6%, to $15.3 million for the three months ended June 30, 1999 as compared to $13.9 million for the three months ended June 30, 1998. 12 13 Operating income for the Professional/IT segment increased $1.8 million, or 8.1%, to $24.3 million for the six months ended June 30, 1999 as compared to $22.5 million for the six months ended June 30, 1998. The operating margin for the Professional/IT segment decreased from 10.6% for the three months ended June 30, 1998 to 9.9% for the three months ended June 30, 1999. The operating margin for the Professional/IT segment was 8.1% and 8.9% for the six months ended June 30, 1999 and 1998, respectively. Slower growth in domestic IT staffing along with decreased demand for permanent placements and higher depreciation and amortization expense were the primary reasons for the operating margin decreases. The Professional/IT purchase acquisitions completed during 1998 and 1999 were the primary factors contributing to the increase in operating income for the three and six months ended June 30, 1999. Operating income for the Commercial segment increased $845,000, or 9.1%, to $10.1 million for the three months ended June 30, 1999 as compared to $9.2 million in the same period last year. Operating income for the Commercial segment increased $1.7 million, or 11.0%, to $17.4 million for the six months ended June 30, 1999 as compared to $15.6 million for the six months ended June 30, 1998. Continued growth in our existing markets and an increase in our strategic alliance relationships have provided the majority of the increase in operating income. Commercial purchase acquisitions completed during 1998 were the primary factors contributing to the increase in operating income for the three and six months ended June 30, 1999. The activity from our strategic alliances, which provide customers with dedicated on-site account management, tend to have lower gross margins than traditional temporary staffing services. However, the higher volumes relatively long-term contracts associated with these relationships have resulted in operating profit growth. The operating margin of the Commercial segment decreased from 8.2% for the three months ended June 30, 1998 to 6.7% for the three months ended June 30, 1999. The operating margin for the Commercial segment was 6.1% and 7.6% for the six months ended June 30, 1999 and 1998, respectively. The decrease in operating margins resulted from lower gross margins due to decreased permanent placement fees and higher revenues from our strategic alliance relationships as well as higher depreciation and amortization expense. Interest Expense. We incurred interest expense of $4.2 million for the three months ended June 30, 1999 as compared to $1.2 million of interest expense for the three months ended June 30, 1998. Interest expense was $7.5 million and $1.9 million for the six months ended June 30, 1999 and 1998, respectively. Interest expense in all periods is primarily related to borrowings on our Credit Facility (as defined below) to fund the cash portion of several of our acquisitions. Net Income. Net income decreased 2.4% to $10.8 million for the three months ended June 30, 1999 as compared to $11.0 million for the same period last year. This decrease of $261,000 is a result of the factors described above. Net margin was 3.5% for the three months ended June 30, 1999 as compared to 4.5% for the three months ended June 30, 1998. Net income decreased 5.8% to $17.2 million for the six months ended June 30, 1999 as compared to $18.2 million for the same period in 1998. This decrease of $1.1 million is a result of the factors described above. Net margin was 2.9% for the six months ended June 30, 1999 as compared to 4.0% for the six months ended June 30, 1998. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of funds are from operations, the proceeds of common stock offerings and borrowings under our Credit Facility. Our principal uses of cash are to fund acquisitions, working capital and capital expenditures. We generally pay our temporary associates and professionals weekly for their services, while receiving payments from customers 30 to 60 days from the date of the invoice. We have increasing requirements for cash resources to fund working capital increases, new office openings and the expansion of existing offices. We have a credit facility with a consortium of banks (the "Credit Facility"). In May 1999, we expanded the Credit Facility from $300 million to $325 million. On March 31, 2000, the maximum amount of borrowings under the Credit Facility is scheduled to revert back to $300 million. The $300 million portion of the Credit Facility matures in August 2003. The Credit Facility is secured by all of the issued and outstanding capital stock of our domestic subsidiaries and 65% of the issued and outstanding capital stock of our foreign subsidiaries. Interest on any borrowings is computed at our option of either the bank group's prime rate or the London interbank offered rate incrementally adjusted based on our operating leverage 13 14 ratios. We pay a quarterly facility fee determined by multiplying the total amount of the Credit Facility by a percentage which varies based on our operating leverage ratios. During the three and six months ended June 30, 1999, our net additional borrowings were approximately $17.7 million and $94.3 million on our Credit Facility, the majority of which was used to pay the cash consideration for several of our acquisitions and for general corporate purposes. In 1998, we entered into fixed interest rate swap agreements with a notional amount of $60.0 million related to borrowings under the Credit Facility to hedge against increases in interest rates which would increase the cost of variable rate borrowings under the Credit Facility. As of August 9, 1999, $277.6 million was outstanding on the Credit Facility. Net cash provided by operating activities was $7.9 million and $6.9 million for the three months ended June 30, 1999 and 1998, respectively, and $3.5 million and $8.9 million for the six months ended June 30, 1999 and 1998, respectively. The net cash provided by or used in operating activities for the periods presented was primarily attributable to net income and changes in operating assets and liabilities. Excluding approximately $4.6 million and $13.7 million in nonrecurring merger expenses paid during the three and six months ended June 30, 1999, respectively, net cash provided by operating activities was $12.5 million and $17.1 million for the three and six months ended June 30, 1999, respectively. Net cash used in investing activities was $25.0 million and $65.7 million for the three months ended June 30, 1999 and 1998, respectively, and $99.6 million and $105.9 million for the six months ended June 30, 1999 and 1998, respectively. Cash used in investing activities for all periods was primarily related to the Company's acquisitions and capital expenditures. Net cash provided by financing activities was $17.7 million and $61.2 million for the three months ended June 30, 1999 and 1998, respectively, and $94.7 million and $100.5 million for the six months ended June 30, 1999 and 1998, respectively. Cash provided by financing activities for the periods presented were primarily attributable to the proceeds from Credit Facility borrowings used in conjunction with the Company's acquisitions. As a result of the above and the related foreign currency translations, combined cash and cash equivalents increased $300,000 and $503,000 in the second quarter of 1999 and 1998, respectively. Cash and cash equivalents decreased $3.2 million for the six months ended June 30, 1999 and increased $2.8 million for the six months ended June 30, 1998. We believe that our cash flows from operations and borrowings available under the Credit Facility will provide sufficient liquidity for our existing operations for the foreseeable future. However, if we continue to make acquisitions or there is a slowdown in the economy or our business is adversely influenced by other factors, we would need to seek additional financing through the public or private sale of equity or debt securities, or we will request our bank group to increase the Credit Facility. See "--Year 2000 Compliance" and "Special Note Regarding Forward Looking Statements." There can be no assurance that we could secure such financing, if and when it is needed, or on terms we deem acceptable. We periodically reassess the adequacy of our liquidity position, taking into consideration current and anticipated operating cash flow, anticipated capital expenditures, acquisition plans, public or private offerings of debt or equity securities and borrowing availability under the Credit Facility. YEAR 2000 COMPLIANCE The Year 2000 issue is the result of computer programs (whether related to IT systems or non-IT systems) being written using two digits rather than four digits to define the applicable year. Computer programs that have time sensitive software may recognize a date using "00" as the Year 1900 rather than the Year 2000. We have assembled a Year 2000 compliance team that is working on these compliance matters company-wide. As part of this project and consistent with our operating strategy, we are implementing one primary front office software package (Caldwell-Spartin) in a majority of our Commercial offices. In a majority of our Professional/IT offices, we are implementing one primary search and retrieval software package (EZaccess) and one primary back office software package (MAS 90). In addition, we have selected and implemented the PeopleSoft system for our back office, administrative and accounting systems. All of these software systems have the ability to process transactions with dates for the Year 2000 and beyond at no incremental cost and, accordingly, we believe that Year 2000 costs with respect to these software systems are not expected to have a material impact on our financial condition or results of operations. 14 15 As to non-IT systems and vendor services, other than banking relationships and utilities (which includes electrical power, water and related items), we believe there is no single system or vendor service that is material to our operations. As to banking needs, our banking relationships are primarily with large national and international financial institutions which are undertaking their own Year 2000 compliance procedures and certifying their compliance to us. Certain of our utility vendors are certifying their Year 2000 compliance to us. To the extent that a utility vendor fails to certify its Year 2000 compliance capability, our contingency plan is to identify and install back-up utility sources necessary to maintain the critical information systems at our corporate headquarters. Utility failures at our corporate or branch offices or the inability of our customers to operate could have a material adverse effect on our revenue sources and could disrupt our customers' payment cycle. We are working with our customers to address the Year 2000 issues that will affect our business and our plan is to ensure that our Year 2000 compliance project is materially complete by September 30, 1999. We believe that the costs of our Year 2000 compliance project for each matter individually and all matters in the aggregate will not be material to our financial condition or results of operations. As to software systems and applications utilized by entities acquired or to be acquired by us, we anticipate that upgrades and/or conversions may be required to ensure that these systems and applications are Year 2000 compliant. We believe that any such upgrades and/or conversions will be timely made and are not expected to have a material impact on our financial condition or results of operations. We believe that Year 2000 issues could affect our results of operations during the remainder of 1999 if our customers delay projects or implement hiring freezes due to their focus on Year 2000 spending and/or delay requests for services or expenditure decisions with regard to their existing IT systems until the beginning of the 2000 year. Due to the diverse services we provide and the unknown effect of Year 2000 issues on customer spending decisions that could impact our revenues and results, these Year 2000 uncertainties could have a material adverse impact on our results of operations for the balance of the 1999 fiscal year. FOREIGN CURRENCY TRANSLATION Operations outside of the United States expose us to foreign currency exchange rate changes and could impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. We operate outside the United States primarily through wholly owned subsidiaries in the United Kingdom and Australia. These foreign subsidiaries use the local currency as their functional currency as sales are generated and expenses are incurred in such currencies. The translation from the applicable foreign currencies to United States dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Gains or losses resulting from such translations are included in stockholders' equity. We continuously monitor our exposure to changes in foreign currency exchange rates. From time to time, we may enter into foreign currency forward and option contracts to manage this exposure. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS Some of the statements in this Quarterly Report on Form 10-Q (this "10-Q") constitute forward-looking statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements made with respect to our future earnings per share, liquidity, results of operations, revenues, plans to accelerate IT staffing revenue growth, slow down in acquisition program, operations and/or future growth opportunities. These statements involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, growth, performance, earnings per share or achievements to be materially different from any future results, levels of activity, growth, performance, earnings per share or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, those listed under "Business - Factors Affecting Finances, Business Prospects and Stock Volatility" and elsewhere in our 1998 Annual Report on Form 10-K as filed with the Commission on March 16, 1999 and under "Potential Risks, 15 16 Detriments and Other Considerations Associated with the Transaction," "Forward Looking Statements" and elsewhere in our proxy statement filed with the Commission on September 25, 1998. The forward-looking statements included in this 10-Q relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "believe," "will," "provide," "anticipate," "future," "could," "forward," "potential," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "implement," "increase," or the negative of such terms or comparable terminology. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on our current plans or assessments which are believed to be reasonable as of the date of this 10-Q. Factors that may cause actual results, goals, targets or objectives to differ materially from those contemplated, projected, forecast, estimated, anticipated, planned or budgeted in such forward-looking statements include, among others, the following possibilities: (1) an inability to successfully implement the executive and organizational changes previously announced; (2) the continuation or worsening of declines in demand for placement (permanent or temporary) or staffing services; (3) changes in industry trends such as changes in the demand for or supply of commercial or professional/information technology personnel, whether on a temporary or permanent placement basis and whether arising out of Year 2000 uncertainties and spending delays or otherwise; (4) adverse developments involving currency exchange rates that have an effect on our operations; (5) unanticipated problems associated with integrating acquired companies and their operations; (6) failure to obtain new customers or retain significant existing customers; (7) inability to carry out marketing and sales plans; (8) inability to obtain capital or refinance debt for future internal and external growth; (9) loss of key executives; and (10) general economic and business conditions (whether foreign, national, state or local) which are less favorable than expected. Actual events or results may differ materially. These factors may cause our actual results to differ materially from any forward-looking statement. Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, growth, earnings per share or achievements. However, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward-looking statements after the date of this 10-Q to conform such statements to actual results. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For the six months ended June 30, 1999, we did not enter into new arrangements, or modify existing arrangements, concerning market risk. For a description of such existing arrangements, see Note 8 to our audited financial statements filed as part of our 1998 Annual Report on Form 10-K as filed with the Commission on March 16, 1999. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources - -- Foreign Currency Translation." PART II ITEM 1. LEGAL PROCEEDINGS From March 12, 1999 through April 22, 1999, John A. Jennen, Richard A. Watson, Rick W. Johnson, Edward D. LaFrance and Trust Equity Advisors Plus, LLC, each purporting to act on behalf of a class of our stockholders, filed complaints against us in the United States District Court for the Eastern District (in the case of each plaintiff except Mr. LaFrance) and Western District (in the case of Mr. LaFrance) of Arkansas, alleging that the defendants (which in addition to us includes one of our officer/directors and an officer of one of our subsidiaries), violated the federal securities laws, and seeks unspecified compensatory and other damages. By order entered May 6, 1999, the four cases pending in the Eastern District of Arkansas were consolidated into one action, and on July 15, 1999, the LaFrance action in the Western District of Arkansas was transferred to the Eastern District to be consolidated with the other four cases. Motions for the appointment of lead plaintiff and lead plaintiff counsel are pending. The defendants believe that these complaints are without merit and deny all of the allegations of wrongdoing and are vigorously defending the suits. 16 17 We also are a party to litigation incidental to our business. We believe that these routine legal proceedings will not have a material adverse effect on the results of operations or financial condition. We maintain insurance in amounts, with coverages and deductibles, that we believe are reasonable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Our Board of Directors at a board meeting held on May 7, 1999, approved amendments to our Amended and Restated By-laws (the "By-laws"). The By-laws and the amendments described below relate to our common stock, the class of which is registered under Section 12(g) of the Securities Exchange Act of 1934, as amended. The amendments to the By-laws consist of the following matters: (1) Article I, Section 4 which now only enables a majority of the Board of Directors (or its duly appointed designees) to call a special meeting of our stockholders; (2) Article II, Section 9 which now requires notice, record date and procedural requirements for any proposed action by written consent of our stockholders; (3) Article I, Section 10 which now establishes advance notice requirements for Director nominations and other stockholder proposals at any meeting of our stockholders; and (4) Article I, Section 5, Article I, Section 7 and Article II, Section 2 all of which include conforming changes related to items (1)-(3) described in this paragraph. A copy of the By-laws, as amended is filed herewith as Exhibit 3.5 to this Form 10-Q. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We held our 1999 Annual Meeting of Stockholders on May 7, 1999 (the "Meeting"). Our stockholders elected ten (10) Directors to serve until the 2000 Annual Meeting or until their successors are duly elected and qualified. Of the 29,310,127 shares of outstanding common stock entitled to vote at the Meeting, 24,634,888 shares were represented either in person or by proxy at the Meeting. Our stockholders voted on and approved the persons listed below to be our Directors, with the voting results at the Meeting being provided below:
Authority Name For Withheld - ------------------------ ---------- --------- W. David Bartholomew 23,445,046 1,189,842 Janice Blethen 23,444,046 1,190,842 Clete T. Brewer 23,860,314 774,574 Jerry T. Brewer 23,460,315 1,174,573 William T. Gregory 23,445,046 1,189,842 William J. Lynch 23,848,785 786,103 John H. Maxwell, Jr. 23,444,246 1,190,642 R. Clayton McWhorter 23,843,105 791,783 Charles A. Sanders, M.D. 23,844,885 790,003 Steven E. Schulte 23,444,723 1,190,165
No other matters to be voted upon came before the Meeting. 17 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.5 Amended and Restated Bylaws of the Company, as amended on May 7, 1999. 11.1 Statement re: computation of per share earnings, reference is made to Note 6 of the StaffMark, Inc. Consolidated Financial Statements contained in this Form 10-Q. 10.30 First Amendment to Third Amended and Restated Credit Agreement dated May 6, 1999, by and among StaffMark, Inc., Robert Walters plc, Robert Walters Tristar pty ltd., the lenders named therein (the "Lenders"), The First National Bank of Chicago, as syndication agent on behalf of the Lenders, Mercantile Bank National Association, as administrative agent on behalf of the Lenders, and Bank of America National Trust and Savings Association, Credit Lyonnais New York Branch, Fleet National Bank and First Union National Bank, as co-agents on behalf of the Lenders. 10.31 Lease Agreement by and between StaffMark, Inc. and Brewer Investments II LC dated June 2, 1999 and effective as of July 1, 1999, for StaffMark, Inc.'s corporate headquarters located at 302 East Millsap and 234 East Millsap in Fayetteville, Arkansas. 27.1 Financial Data Schedule for the three months ended June 30, 1999, submitted to the SEC in electronic format.
(b) Reports on Form 8-K 1. None. 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. STAFFMARK, INC. Date: August 13, 1999 /s/ CLETE T. BREWER ------------------------------ Clete T. Brewer Chief Executive Officer and President Date: August 13, 1999 /s/ TERRY C. BELLORA ------------------------------ Terry C. Bellora Chief Financial Officer 18 19 INDEX TO EXHIBITS
Exhibit Number Description ------- ----------- 3.5 Amended and Restated Bylaws of the Company, as amended on May 7, 1999. 11.1 Statement re: computation of per share earnings, reference is made to Note 6 of the StaffMark, Inc. Consolidated Financial Statements contained in this Form 10-Q. 10.30 First Amendment to Third Amended and Restated Credit Agreement dated May 6, 1999, by and among StaffMark, Inc., Robert Walters plc, Robert Walters Tristar pty ltd., the lenders named therein (the "Lenders"), The First National Bank of Chicago, as syndication agent on behalf of the Lenders, Mercantile Bank National Association, as administrative agent on behalf of the Lenders, and Bank of America National Trust and Savings Association, Credit Lyonnais New York Branch, Fleet National Bank and First Union National Bank, as co-agents on behalf of the Lenders. 10.31 Lease Agreement by and between StaffMark, Inc. and Brewer Investments II LC dated June 2, 1999 and effective as of July 1, 1999, for StaffMark, Inc.'s corporate headquarters located at 302 East Millsap and 234 East Millsap in Fayetteville, Arkansas. 27.1 Financial Data Schedule for the three months ended June 30, 1999, submitted to the SEC in electronic format.
EX-3.5 2 AMENDED/RESTATED BYLAWS OF THE COMPANY 1 Exhibit 3.5 THE AMENDED AND RESTATED BY-LAWS OF STAFFMARK, INC. ARTICLE I - STOCKHOLDERS SECTION 1. Annual Meeting - The annual meeting of the stockholders of the Corporation shall be held on such date, at such time and at such place within or without the State of Delaware as may be designated by the Board of Directors, for the purpose of electing Directors and for the transaction of such other business as may be properly brought before the meeting. SECTION 2 Special Meetings - Except as otherwise provided in the Certificate of Incorporation, a special meeting of the stockholders of the Corporation shall be called only by the secretary of the Corporation at the request of (i) a majority of the total number of Directors which the Corporation at the time would have if there were no vacancies or (ii) by any person authorized by the Board of Directors (through a vote of a majority of the total number of Directors which the Corporation at the time would have if there were no vacancies) to call a special meeting. Any special meeting of the stockholders shall be held on such date, at such time and at such place within or without the State of Delaware as the Board of Directors or the authorized person requesting such special meeting may designate. At a special meeting of the stockholders, no business shall be transacted and no corporation action shall be taken other than that stated in the notice of the meeting. SECTION 3 Notice of Meetings Except as otherwise provided in these By-Laws or by law, a written notice of each meeting of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of the Corporation entitled to vote at such meeting at his address as it appears on the records of the Corporation. The notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. SECTION 4 Quorum. At any meeting of the stockholders, the holders of a majority in number of the total outstanding shares of stock of the Corporation entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum of the stockholders 1 2 for all purposes, unless the representation of a larger number of shares shall be required by law, by the Certificate of Incorporation or by these By-Laws, in which case the representation of the number of shares so required shall constitute a quorum; provided that at any meeting of the stockholders at which the holders of any class of stock of the Corporation shall be entitled to vote separately as a class, the holders of a majority in number of the total outstanding shares of such class, present in person or represented by proxy, shall constitute a quorum for purposes of such class vote unless the representation of a larger number of shares of such class shall be required by law, by the Certificate of Incorporation, or by these By-Laws. SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present in person or represented by proxy at any meeting of the stockholders, the holders of a majority in number of the shares of stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting may adjourn from time to time; provided, however, that if the holders of any class of stock of the Corporation are entitled to vote separately as a class upon any matter at such meeting, any adjournment of the meeting in respect of action of such class upon such matter shall be determined by the holders of a majority of the shares of such class present in person or represented by proxy and entitled to vote at such meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournments is taken. At the adjourned meeting the stockholders, or the holder of any class of stock entitled to vote separately as a class, as the case may be, may transact any business which might have been transacted by them at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. SECTION 6. Organization. The President or, in his absence, any Vice President shall call all meetings of the stockholders to order, and shall act as Chairman of such meetings. In the absence of the President and all of the Vice Presidents, the holders of a majority in number of the shares of stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting shall elect a Chairman. The Secretary of the Corporation shall act as Secretary of all meetings of the stockholders; but in the absence of the Secretary, the Chairman may appoint any person to act as Secretary of the meeting. It shall be the duty of the Secretary to prepare and make, at least ten days before every meeting of stockholders, a complete list of stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held, for the ten days next preceding the meeting, to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, and shall be produced and kept at the time and place of the meeting during the whole time thereof and subject to the inspection of any stockholder who may be present. 2 3 SECTION 7. Voting. Except as otherwise provided in the Certificate of Incorporation or by law, each stockholder shall be entitled to one vote for each share of the capital stock of the Corporation registered in the name of such stockholder upon the books of the Corporation. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. When directed by the presiding officer or upon the demand of any stockholder, the vote upon any matter before a meeting of stockholders shall be by ballot. Except as otherwise provided by law or by the Certificate of Incorporation, Directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the stockholders entitled to vote in the election and, whenever any corporate action, other than the election of Directors is to be taken, it shall be authorized by a majority of the votes cast at a meeting of stockholders by the stockholders entitled to vote thereon. Shares of the capital stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. SECTION 8. Inspectors. When required by law or directed by the presiding officer or upon the demand of any stockholder entitled to vote, but not otherwise, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided at any meeting of the stockholders by two or more inspectors who may be appointed by the Board of Directors before the meeting, or if not so appointed, shall be appointed by the presiding officer at the meeting. If any person so appointed fails to appear or act, the vacancy may be filled by appointment in like manner. SECTION 9. Consent of Stockholders in Lieu of Meeting. Except as otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken by the stockholders of the Corporation at an annual or special meeting of the stockholders may be taken without a meeting and without a vote, if a consent in writing, meeting the requirements of the succeeding proviso and setting forth the action so taken, shall be signed by the record holders of outstanding stock as of the record date duly established by the Board of Directors consistent with these By-Laws having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted; provided, however, no purported action shall be effective by written consent unless written notice of the proposed action is provided to the secretary of the Corporation and the Board of Directors shall have been provided the opportunity to meet, within ten days of the secretary's receipt of such written notice, and duly establish a record date which shall be effective for taking such action by the written consent, which record date shall be as of a date within ten days of the date upon which the Board of Directors shall have met to consider, and establish a record date, for the proposed action by written consent set forth in such notice. Prompt notice of the taking of any such corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 3 4 SECTION 10. Notice of Stockholder Business and Nominations. Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) by or at the direction of the Board of Directors pursuant to a resolution adopted by a majority of the total number of Directors which the Corporation at the time would have if there were no vacancies or (ii) by any stockholder of the Corporation who is entitled to vote at the meeting with respect to the election of Directors or the business to be proposed by such stockholder, as the case my be, who complies with the notice procedures set forth below and who is a stockholder of record at the time such notice is delivered to the secretary of the Corporation as provided below. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (ii) of the preceding paragraph, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and such business must be a proper subject for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder's notice shall be delivered to the secretary of the Corporation at the principal executive office of the Corporation not less than sixty days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days, or delayed by more than 30 days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than either the close of business on the tenth day following the earlier of (i) the day on which notice of the date of such meeting was mailed or (ii) the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (x) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (y) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (z) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (A) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (B) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. Notwithstanding anything in the second sentence of the preceding paragraph to the contrary, in the event that the number of Directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least eighty days prior to the first anniversary of the preceding year's annual meeting, a stockholders' notice required by the preceding paragraph shall also be considered timely, but only with respect to 4 5 nominees for any new positions created by such increase, if it shall be delivered to the secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. ARTICLE II BOARD OF DIRECTORS SECTION 1. Number and Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, none of whom need be stockholders of the Corporation. The numbers of Directors constituting the Board of Directors shall be fixed from time to time by resolution passed by a majority of the Board of Directors. The Director shall, except as hereinafter otherwise provided for filling vacancies, be elected at the annual meeting of stockholders, and shall hold office until their respective successors are elected and qualified or until their earlier resignation or removal. SECTION 2. Vacancies and Additional Directors. Vacancies caused by death, resignation, retirement, disqualification, or for any other reason, and any newly created directorship resulting from any increase in the authorized number of Directors, may be filled by the affirmative vote of a majority of the Directors then in office, although less than a quorum, and any Director so elected to fill any such vacancy or newly created directorship shall hold office until his successor is elected and qualified or until his earlier resignation or removal. When one or more Directors shall resign effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office as herein provided in connection with the filling of other vacancies. SECTION 3. Place of Meeting - The Board of Directors may hold its meetings in such place or places in the State of Delaware or outside the State of Delaware as the Board from time to time shall determine. SECTION 4. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as the Board from time to time by resolution shall determine. No notice shall be required for any regular meeting of the Board of Directors; but a copy of every resolution fixing or changing the time or place of regular meetings shall be mailed to every Director at least five days before the first meeting held in pursuance thereof. SECTION 5. Special Meeting. Special meetings of the Board of Directors shall be held whenever called by direction of the President, the Chairman of the Board or by any two of the Directors then in office. 5 6 Notice of the day, hour and place of holding of each special meeting shall be given by mailing the same at least two days before the meeting or by causing the same to be transmitted by telegraph, cable or wireless at least one day before the meeting to each Director. Unless otherwise indicated in the notice thereof, any and all business other than an amendment of these By-Laws may be transacted at any special meeting, and an amendment of these By-Laws may be acted upon if the notice of the meeting shall have stated that the amendment of these By-Laws is one of the purposes of the meeting. At any meeting at which every Director shall be present, even though without any notice, any business may be transacted, including the amendment of these By-Laws. SECTION 6. Quorum. Subject to the provisions of Section 2 of this Article II, a majority of the members of the Board of Directors in office (but in no case less than one-third of the total number of Directors nor less than two Directors) shall constitute a quorum for the transaction of business and the vote of the majority of the Directors present at any meeting of the Board of Directors at which a quorum is present shall be the act of the Board of Directors. If at any meeting of the Board there is less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 7. Organization. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman, an acting Chairman shall be elected from the Directors present to preside at such meeting. The Secretary of the Corporation shall act as Secretary of all meetings of the Directors; but in the absence of the Secretary, the Chairman may appoint any person to act as Secretary of the meeting. SECTION 8. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence of disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not be or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided by resolution passed by a majority of the whole Board, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these By-Laws; and unless such resolution, these By-Laws, or the Certificate of Incorporation expressly to provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. 6 7 SECTION 9. Conference Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, the members of the Board of Directors or any committee designated by the Board, may participate in a meeting of the Board of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be. ARTICLE III OFFICERS SECTION 1. Officers. The officers of the Corporation may be a President, one or more Vice Presidents, a Secretary and a Treasurer, and such additional officers, if any, as shall be elected by the Board of Directors pursuant to the provisions of Section 6 of this Article III. The President, one or more Vice Presidents, the Secretary and the Treasurer shall be elected by the Board of Directors at its first meeting after each annual meeting of the stockholders. The failure to hold such election shall not of itself terminate the term of office of any officer. All officers shall hold office at the pleasure of the Board of Directors. Any officer may resign at any time upon written notice to the Corporation. Officers may, but need not, be Directors. Any number of offices may be held by the same person. All officers, agents and employees shall be subject to removal, with or without cause, at any time by the Board of Directors. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. All agents and employees other than officers elected by the Board of Directors shall also be subject to removal, with or without cause, at any time by the officers appointing them. Any vacancy caused by the death of any officer, his resignation, his removal, or otherwise, may be filled by the Board of Directors, and any officer so elected shall hold office at the pleasure of the Board of Directors. In addition to the powers and duties of the officers of the Corporation as set forth in these By-Laws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board of Directors. 7 8 SECTION 2. Powers and Duties of the President. The President shall be the chief executive officer of the Corporation, and subject to the control of the Board of Directors, shall have general charge and control of all its business and affairs and shall have all powers and shall perform all duties incident to the office of President. He shall preside at all meetings of the stockholders and at all meetings of the Board of Directors and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors. SECTION 3. Powers and Duties of the Vice Presidents. Each Vice President shall have all powers and shall perform all duties incident to the office of Vice President and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors or the President. SECTION 4. Powers and Duties of the Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the stockholders in books provided for that purpose, he shall attend to the giving or serving of all notices of the Corporation; he shall have custody of the corporate seal of the Corporation and shall affix the same to such documents and other papers as the Board of Directors or the President shall authorize and direct; he shall have charge of the stock certificate books, transfer books and stock ledgers and such other books and papers as the Board of Directors or the President shall direct, all of which shall at all reasonable times be open to the examination of any Director, upon application, at the office of the Corporation during business hours; and he shall have all powers and shall perform all duties incident to the office of Secretary and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors or the President. SECTION 5. Powers and Duties of the Treasurer. The Treasurer shall have custody of, and when proper shall pay out, disburse or otherwise dispose of, all funds and securities of the Corporation which may have come into his hands; he may endorse on behalf of the Corporation for collection checks, notes and other obligations and shall deposit the same to the credit of the Corporation in such bank or banks or depository or depositories as the Board of Directors may designate; he shall sign all receipts and vouchers for payments made to the Corporation; he shall enter or cause to be entered regularly in the books of the Corporation kept for the purpose full and accurate accounts of all moneys received or paid or otherwise disposed of by him and whenever required by the Board of Directors or the President shall render statements of such accounts; he shall, at all reasonable times, exhibit his books and accounts to any Director of the Corporation upon application at the office of the Corporation during business hours; and he shall have all powers and shall perform all duties incident of the office of Treasurer and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors or the President. SECTION 6. Additional Officers. The Board of Directors may from time to time elect such other officers (who may but need not be Directors), including a Controller, Assistant Treasurer, Assistant Secretaries and Assistant Controllers, as the Board may deem advisable and 8 9 such officers shall have such authority and shall perform such duties as may from time to time be assigned to them by the Board of Directors or the President. The Board of Directors may from time to time by resolution delegate to any Assistant Treasurer or Assistant Treasurers any of the powers or duties herein assigned to the Treasurer; and may similarly delegate to any Assistant Secretary or Assistant Secretaries any of the powers or duties herein assigned to the Secretary. SECTION 7. Giving of Bond by Officers. All officers of the Corporation, if required to do so by the Board of Directors, shall furnish bonds to the Corporation for the faithful performance of their duties, in such penalties and with such conditions and security as the Board shall require. SECTION 8. Voting Upon Stocks. Unless otherwise ordered by the Board of Directors, the President or any Vice President shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or in the name of the Corporation to execute proxies to vote, at any meeting of stockholders of any corporation in which the Corporation may hold stock, and at any such meeting shall possess and may exercise, in person or by proxy, any and all rights, powers and privileges incident to the ownership of such stock. The Board of Directors may from time to time, by resolution, confer like powers upon any other person or persons. SECTION 9. Compensation of Officers. The officers of the Corporation shall be entitled to receive such compensation for their services as shall from time to time be determined by the Board of Directors. ARTICLE IV INDEMNIFICATION OF DIRECTORS AND OFFICERS SECTION 1. Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request to the Corporation as a Director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation, as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding had no reasonable cause to believe his conduct was unlawful, except that in the case 9 10 of an action or suit by or in the right of the Corporation to procure a judgment in its favor (1) such indemnification shall e limited to expenses (including attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (2) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. Successful Defense. To the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article IV or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 3. Determination that Indemnification is Proper. Any indemnification of a Director or officer of the Corporation under Section 1 of this Article IV (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the Director or officer is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Section 1. Any indemnification of an employee or agent of the Corporation under Section 1 (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1. Any such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such actions, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. SECTION 4. Advance Payment of Expenses. Unless the Board of Directors otherwise determines in a specific case, expenses incurred by a Director or officer in defending a civil or criminal action, suite or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article IV. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may authorize the 10 11 Corporation's legal counsel to represent such Director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. SECTION 5. Survival: Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each Director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the Delaware General Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such Director, officer, employee or agent. The indemnification provided by this Article IV shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent shall inure to the benefit of the heirs, executors and administrators of such a person. The corporation may enter into an agreement with any of its Directors, officers, employees or agents providing for indemnification and advancement of expenses, including attorneys fees, that may change, enhance, qualify or limit any right to indemnification or advancement of expenses created by this Article IV. SECTION 6. Severability. If this Article IV or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorney's fees), judgment, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the fullest extent permitted by any applicable portion of this Article IV that shall not have been invalidated and to the fullest extent permitted by applicable law. SECTION 7. Subrogation. In the event of payment of indemnification to a person described in Section 1 of this Article IV, the Corporation shall be subrogated to the extent of such payment to any right of recovery such person may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery. SECTION 8. No Duplication of Payments. The Corporation shall not be liable under this Article IV to make any payments in connection with any claim made against a person described in Section 1 of this Article IV to the extent such person has otherwise received 11 12 payment (under any insurance policy, by-law or otherwise) of the amounts otherwise indemnifiable hereunder. ARTICLE V STOCK SEAL FISCAL YEAR SECTION 1. Certificates for Shares of Stock. The certificates for shares of stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be approved by the Board of Directors. All certificates shall be signed by the President or a Vice president and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall not be valid unless so signed. In case any officer or officers who shall have signed any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates had not ceased to be such officer or officers of the Corporation. All certificates for shares of stock shall be consecutively numbered as the same are issued. The name of the person owning the shares represented thereby with the number of such shares and the date of issue thereof shall be entered on the books of the Corporation. Except as hereinafter provided, all certificates surrendered to the Corporation for transfer shall be canceled, and no new certificates shall be issued until former certificates for the same number of shares have been surrendered and canceled. SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person owning a certificate for shares of stock of the Corporation alleges that it has been lost, stolen or destroyed, he shall file in the office of the Corporation an affidavit setting forth, to the best of his knowledge and belief, the time, place and circumstances of the loss, theft or destruction, and if required by the Board of Directors, a bond of indemnity or other indemnification sufficient in the opinion of the Board of Directors to indemnify the Corporation and its agents against any claim that may be made against it or them on account of the alleged loss, theft or destruction of any such certificate or the issuance of a new certificate in replacement therefor. Thereupon the Corporation may cause to be issued to such person a new certificate in replacement for the certificate alleged to have been lost, stolen or destroyed. Upon the stub of every new certificate so issued shall be noted the fact of such issue and the number, date and the name of the registered owner of the lost, stolen or destroyed certificate in lieu of which the new certificate is issued. SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall be transferred on the books of the Corporation by the holder hereof, in person or by his attorney duly authorized 12 13 in writing, upon surrender and cancellation of certificates for the number of shares of stock to be transferred, except as provided in Section 2 of this Article IV. SECTION 4. Regulations. The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. SECTION 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, as the case may be, the Board of Directors may fix, in advance, a record date, which shall not be (i) more than sixty (60) nor less than ten (10) days before the date of such meeting, or (ii) in the case of corporate action to be taken by consent in writing without a meeting, prior to, or more than ten (10) days after, the date upon which the resolution fixing the record date is adopted by the Board of Directors, or (iii) more than sixty (60) days prior to any other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or so vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is delivered to the Corporation; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. Dividends. Subject to the provisions of the Certificate of Incorporation, the Board of Directors shall have power to declare and pay dividends upon shares of stock of the Corporation, but only out of funds available for the payment of dividends as provided by law. Subject to the provisions of the Certificate of Incorporation, any dividends declared upon the stock of the Corporation shall be payable on such date or dates as the Board of Directors shall determine. If the date fixed for the payment of any dividend shall in any year fall upon a legal holiday, then the dividend payable on such date shall be paid on the next day not a legal holiday. SECTION 7. Corporate Seal. The Board of Directors shall provide a suitable seal, containing the name of the Corporation, which seal shall be kept in the custody of the Secretary. A duplicate of the seal may be kept and be used by any officer of the Corporation designated by the Board of Directors or the President. 13 14 SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be such fiscal year as the Board of Directors from time to time by resolution shall determine. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board of Directors, countersigned by such officers of the Corporation and/or other persons as the Board of Directors from time to time shall designate. Checks, drafts, bills of exchange, acceptance notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Treasurer and/or such other officers or persons as the Board of Directors from time to time may designate. SECTION 2. Loans. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board of Directors. When authorized to do so, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances. SECTION 3. Contracts. Except as otherwise provided in these By-Laws or by law or as otherwise directed by the Board of Directors, the President or any Vice President shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall be affixed thereto by any of such officers or the Secretary or an Assistant Secretary. The Board of Directors, the President or any Vice President designated by the Board of Directors may authorize any other officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board or any such officer may be general or confined to specific instances. SECTION 4. Waivers of Notice. Whenever any notice whatever is required to be given by law, by the Certificate of Incorporation or by these By-Laws to any person or persons, a 14 15 waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto. SECTION 5. Officers Outside of Delaware. Except as otherwise required by the laws of the State of Delaware, the Corporation may have an office or offices and keep its books, documents and papers outside of the State of Delaware at such place or places as from time to time may be determined by the Board of Directors or the President. ARTICLE VII AMENDMENTS These By-Laws and any amendment thereof may be altered, amended or repealed, or new By-Laws may be adopted, by the Board of Directors at any regular or special meeting by the affirmative vote of a majority of all of the members of the Board, provided in the case of any special meeting at which all of the members of the Board are not present, that the notice of such meeting shall have stated that the amendment of these By-Laws was one of the purposes of the meeting; but these By-Laws and any amendment thereof may be altered, amended or repealed or new By-Laws may be adopted by the holders of a majority of the total outstanding stock of the Corporation entitled to vote at any annual meeting or at any special meeting provided, in the case of any special meeting, that notice of such proposed alteration, amendment, repeal or adoption is included in the notice of the meeting. 15 16 CERTIFICATION OF ADOPTION The foregoing By-Laws, as amended and restated, of the Corporation have been duly adopted this seventh day of May, 1999, by action of the Board of Directors of the Corporation pursuant to the laws of this State. IN TESTIMONY THEREOF, witness the hand of the undersigned as Secretary of the Corporation on such date. ------------------------------- Secretary APPROVED: President [SEAL] 16 EX-10.30 3 1ST AMENDMENT TO 3RD AMENDED/RESTATED CREDIT AGRMT 1 Exhibit 10.30 FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "First Amendment") is made and entered into as of the 6th day of May, 1999, by and among STAFFMARK, INC., a Delaware corporation (the "Borrower"), ROBERT WALTERS PLC, a limited liability company organized and existing under the laws of England and Wales ("Robert Walters"), ROBERT WALTERS TRISTAR PTY LTD., a limited liability company organized and existing under the laws of Australia ("Tristar," and with Robert Walters referred to herein as the "Alternate Currency Borrowers"), the undersigned lenders which are parties to the Credit Agreement (as herein defined) (the "Lenders"), THE FIRST NATIONAL BANK OF CHICAGO, as syndication agent on behalf of Lenders (in such capacity, the "Syndication Agent") and MERCANTILE BANK NATIONAL ASSOCIATION, as administrative agent on behalf of Lenders (in such capacity, the "Administrative Agent" and collectively with the Syndication Agent referred to herein as the "Agents"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CREDIT LYONNAIS NEW YORK BRANCH, FLEET NATIONAL BANK and FIRST UNION NATIONAL BANK, as co-agents on behalf of the Lenders (in such capacity, the "Co-Agents"). WITNESSETH: WHEREAS, the Borrower, the Agents, the Co-Agents and the Lenders have previously entered into that certain Third Amended and Restated Credit Agreement dated as of January 20, 1999 (as amended, the "Credit Agreement"); and WHEREAS, the Borrower has executed and delivered to Lenders, respectively, its Revolving Credit Notes in the aggregate original principal amount of $300,000,000.00 (collectively, the "Original Notes"); and WHEREAS, the Borrower, Agents, Co-Agents and Lenders desire to, among other things, temporarily increase the maximum principal amount of Revolving Credit Loans available to Borrower under the Credit Agreement from $300,000,000.00 to $325,000,000.00 for the period from the date hereof up to but excluding March 31, 2000 and to amend and restate those Original Notes of the Lenders which are accepting a commitment under such new temporary facility during such period, all upon the terms and conditions set forth herein; and WHEREAS, from and after March 31, 2000 through August 20, 2003, the Primary Facility (as defined in Section 3.1(a) herein) shall continue as set forth herein; 1 2 NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto mutually promise and agree as follows: 1. A new definition of "Additional Commitment" shall be added to Section 2 of the Credit Agreement in proper alphabetical order as follows: Additional Commitment shall mean for each Lender, subject to termination or reduction as set forth in Section 3.12 or to termination upon expiration of the Temporary Facility as set forth in Section 3.1(b), the amount set forth as the Additional Commitment of such Lender next to its name on the signature pages of the First Amendment or on the signature pages of any subsequent amendment or of any subsequent Assignment Agreement to which such Lender is a party, and Additional Commitments shall mean all of such Additional Commitments of any of the Lenders holding the same. 2. A new definition of "First Amendment" shall be added to Section 2 of the Credit Agreement in proper alphabetical order as follows: First Amendment shall mean that certain First Amendment to Third Amended and Restated Credit Agreement dated as of May 6, 1999 made by and among the Borrower, the Agents, the Co-Agents and the Lenders. 3. A new clause (vii) shall be added at the end of the definition of "Interest Period" in Section 2 of the Credit Agreement immediately following clause (vi) therein as follows: (vii) No Interest Period with respect to any LIBOR Loan under the Temporary Facility shall extend beyond March 31, 2000. 4. The definition of "Loan Commitment" in Section 2 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: Loan Commitment for each Lender shall mean the total of the Revolving Credit Commitment, if any, the Additional Commitment, if any, and the Swing Line Commitment, if any, of each such Lender. 5. The definition of "Pro Rata Share" in Section 2 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: Pro Rata Share with respect to each Lender shall mean: (i) with respect to Loans made or to be advanced under Section 3.1(a) herein, such Lender's percentage, if any, of the total Revolving Credit Commitments of all of 2 3 the Lenders, determined by dividing such Lender's Revolving Credit Commitment under Section 3.1(a) by the aggregate sum of the total Revolving Credit Commitments of all of the Lenders under Section 3.1(a), and (ii) with respect to Loans made or to be advanced under the Temporary Facility under Section 3.1(b) herein, such Lender's percentage, if any, of the total Additional Commitments of all of the Lenders, determined by dividing the amount of such Lender's Additional Commitment under Section 3.1(b) by the aggregate sum of the total Additional Commitments of all of the Lenders under such Section 3.1(b); provided that as used in Section 8 and Section 9.6 herein, the term Pro Rata Share shall mean with respect to each Lender, such Lender's percentage of the Total Revolving Credit Commitment of all of the Lenders (under both Section 3.1(a) and Section 3.1(b)), determined by dividing the sum of such Lender's Revolving Credit Commitment, if any, and its Additional Commitment, if any, by the aggregate sum of the Total Revolving Credit Commitment of all of the Lenders (i. e. under both Section 3.1(a) and Section 3.1(b)). 6. The definition of "Revolving Credit Notes" in Section 2 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: Revolving Credit Notes shall mean each of the Revolving Credit Notes of the Borrower to be executed and delivered to each of the Lenders pursuant to Section 3.1, pursuant to the First Amendment or pursuant to an Assignment Agreement, as the same may from time to time be amended, modified, extended or renewed. 7. A new definition of "Temporary Facility" shall be added to Section 2 of the Credit Agreement in proper alphabetical order as follows: Temporary Facility shall mean that portion of the Total Revolving Credit Commitments of the Lenders in excess of Three Hundred Million Dollars ($300,000,000.00), which is available under Section 3.1(b) herein up to but excluding March 31, 2000. 8. The definition of "Total Revolving Credit Commitment" in Section 2 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: Total Revolving Credit Commitment shall mean the sum of the total Revolving Credit Commitments of all of the Lenders plus the total Additional Commitments of all of the Lenders. 9. Section 3.1 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: 3 4 3.1 Revolving Credit Loans. (a) Primary Facility. Subject to the terms and conditions hereof, during the Term of this Agreement, each Lender hereby severally agrees to make such loans (each, individually, a "Revolving Credit Loan" and collectively with the Loans under Section 3.1(b) below, the "Revolving Credit Loans"), to the Borrower as the Borrower may from time to time request pursuant to Section 3.3(a). Subject to the terms and conditions hereof, during the Term of this Agreement, the Alternate Currency Bank hereby agrees to make Alternate Currency Loans to the Alternate Currency Borrowers pursuant to the applicable Alternate Currency Addenda as the applicable Alternate Currency Borrower may from time to time request pursuant to Section 3.19 and the Applicable Currency Addenda. The aggregate principal amount of Revolving Credit Loans which Lenders, cumulatively, shall be required to have outstanding under this Section 3.1(a) at any one time, plus such Lenders' respective obligations (i) under Section 3.18 to purchase pro rata interests in the outstanding principal amount of the Swing Loans then outstanding under Section 3.2, (ii) to purchase participations under Section 3.19(e) in the Dollar Amounts of Alternate Currency Loans then outstanding pursuant to Section 3.19, and (iii) to purchase participations under Section 3.4(d) in the undrawn face amount of Letters of Credit issued by Administrative Agent and then outstanding under Section 3.4, shall not, other than as a result of currency exchange rate fluctuations, exceed Three Hundred Million Dollars ($300,000,000.00). The amount each Lender shall be required to have outstanding hereunder as Revolving Credit Loans plus its undivided Pro Rata Share of each Swing Loan made by Mercantile under Section 3.2 plus its undivided Pro Rata Share participation interest in each Letter of Credit issued by Administrative Agent under Section 3.4, plus its undivided Pro Rata Share of each Alternate Currency Loan made pursuant to Section 3.19, shall not, other than as a result of currency exchange rate fluctuations, exceed, in the aggregate at any one time outstanding, the amount of such Lender's Revolving Credit Commitment. Each Revolving Credit Loan under this Section 3.1(a) shall be made by the Lenders ratably in proportion to their respective Revolving Credit Commitments. Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow the amounts available under this Section 3.1(a). (b) Temporary Facility. From the date of the First Amendment up to but excluding March 31, 2000, subject to the other terms and conditions of this Agreement and provided that the sum of the Revolving Credit Loans, Alternate Currency Loans, Letters of Credit and Swing Loans made by Lenders under Section 3.1(a) above and presently outstanding equal the sum of all of the Revolving Credit Commitments of the Lenders under Section 3.1(a) 4 5 above, each Lender having an Additional Commitment hereby severally agrees to make such loans (each, individually, a "Revolving Credit Loan") to the Borrower as the Borrower may from time to time request pursuant to Section 3.3(a), and subject to the other terms and conditions hereof: (x) the Alternate Currency Bank hereby agrees to make Alternate Currency Loans under the Additional Commitments available under this Section 3.1(b) to the Alternate Currency Borrowers pursuant to the applicable Alternate Currency Addenda as the applicable Alternate Currency Borrower may from time to time request pursuant to Section 3.19 and the Applicable Currency Addenda, (y) the Administrative Agent agrees to issue Letters of Credit for the account of Borrower under the Additional Commitments available under this Section 3.1(b) pursuant to the applicable Letter of Credit Applications as the Borrower may from time to time request pursuant to Section 3.4, and (z) the Administrative Agent agrees to make Swing Loans to Borrower pursuant to Section 3.2, all of which Alternate Currency Loans, Letter of Credit obligations and Swing Loans shall be subject to participation by the Lenders under their Additional Commitments available under this Section 3.1(b) as provided respectively in Section 3.19(e), Section 3.4(d) and Section 3.18 herein. The aggregate principal amount of Revolving Credit Loans which Lenders, cumulatively, shall be required to have outstanding under this Section 3.1(b) at any one time, plus such Lenders' respective obligations under this Section 3.1(b) (i) to purchase pro rata interests under Section 3.18 in the outstanding principal amount of the Swing Loans then outstanding under Section 3.2, (ii) to purchase participations under Section 3.19(e) in the Dollar Amounts of Alternate Currency Loans then outstanding pursuant to Section 3.19, and (iii) to purchase participations under Section 3.4(d) in the undrawn face amount of Letters of Credit issued by Administrative Agent and then outstanding under Section 3.4, shall not, other than as a result of currency exchange rate fluctuations, exceed Twenty-Five Million Dollars ($25,000,000.00). The amount each Lender shall be required to have outstanding under this Section 3.1(b) as Revolving Credit Loans plus its undivided Pro Rata Share of each Swing Loan made by Mercantile under Section 3.2 plus its undivided Pro Rata Share participation interest in each Letter of Credit issued by Administrative Agent under Section 3.4, plus its undivided Pro Rata Share of each Alternate Currency Loan made pursuant to Section 3.19, shall not, other than as a result of currency exchange rate fluctuations, exceed, in the aggregate at any one time outstanding, the amount of such Lender's Additional Commitment. Each Revolving Credit Loan under this Section 3.1(b) shall be made by the Lenders ratably in proportion to their respective Additional Commitments. Subject to the terms and conditions of this Agreement, prior to March 31, 2000 the Borrower may borrow, repay and reborrow the amounts available under this Section 3.1(b). On March 31, 2000, Borrower agrees to immediately repay any and all Loans and other Borrower's Obligations then outstanding under Temporary Facility together with all accrued and unpaid 5 6 interest and fees due thereon and any amounts due under Section 3.6 herein with respect to any such Loans then outstanding as LIBOR Loans. (c) Notes. The Revolving Credit Loans under Sections 3.1(a) and (b) above shall be evidenced on the date of the First Amendment by the Revolving Credit Notes of the Borrower, dated either as of the date of this Agreement or as of the date of the First Amendment in the case of Lenders with Additional Commitments under the Temporary Facility, and payable by the Borrower to the respective orders of each of the Lenders in the aggregate original principal amount of Three Hundred Twenty-Five Million Dollars ($325,000,000.00) and otherwise substantially in the form attached as Exhibit A hereto (or as Exhibit A to the First Amendment in the case of Lenders with Additional Commitments under the Temporary Facility) and incorporated herein by reference (as the same may from time to time be amended, restated, modified, extended or renewed, the "Revolving Credit Notes"). The Alternate Currency Loans shall be evidenced by Alternate Currency Notes of the applicable Alternate Currency Borrower, each dated the date hereof and payable by the Alternate Currency Borrower to the order of the Alternate Currency Bank in the original principal amount of $25,000,000 and otherwise in the form attached hereto as Exhibit A-1 (as the same may be from time to time amended, restated, modified, extended or renewed, the "Alternate Currency Notes"). The Revolving Credit Notes and the Alternate Currency Notes shall mature on August 20, 2003, unless earlier terminated by acceleration or otherwise upon the occurrence of an Event of Default under this Agreement. (d) Order of Borrowing, Repayments and Commitment Reductions. Borrower and Lenders agree that notwithstanding any other provision of this Agreement, prior to the occurrence of an Event of Default hereunder, the amounts borrowed hereunder shall be advanced by the Lenders under Section 3.1(a) first, and only after all amounts available under Section 3.1(a) have been borrowed and are outstanding shall the amounts borrowed under this Section 3.1 be advanced under the Temporary Facility under Section 3.1(b). Borrower and Lenders further agree that notwithstanding any other provision of this Agreement, prior to the occurrence of an Event of Default hereunder, any repayments of Loans hereunder shall be applied first to reduce any outstanding Loans under the Temporary Facility under Section 3.1(b) until repaid in full before being applied to reduce the Loans and other obligations outstanding under Section 3.1(a). Borrower and Lenders further agree that any partial terminations of the Revolving Credit Commitments and the Additional Commitments pursuant to Section 3.12 shall be applied to terminate the Additional Commitments under Temporary Facility first before any such termination or reduction shall be applied to the Revolving Credit Commitments under Section 3.1(a). 6 7 (e) Each Lender shall record in its books and records, and prior to any transfer of its Notes shall endorse on the schedules forming a part thereof, appropriate notations to evidence the date and amount of each Loan made by it during the Term hereof, whether such Loan is then a Base Rate Loan, a LIBOR Loan or an Alternate Currency Loan, and the date and amount of each payment of principal made by the applicable Borrower with respect thereto. Each Lender is hereby irrevocably authorized by Borrowers so to endorse its Notes and to attach to and make a part of any such Notes a continuation of any such schedule as and when required; provided, however that the obligation of Borrowers to repay each Loan made hereunder shall be absolute and unconditional, notwithstanding any failure of any Lender to endorse or any mistake by any Lender in connection with endorsement on the schedules attached to their respective Notes. The books and records of each Lender (including, without limitation, the schedules attached to the Notes) showing the account between such Lender and Borrower shall be admissible in evidence in any action or proceeding and shall constitute prima facie proof of the items therein set forth. 10. Section 3.2 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: 3.2 The Swing Line . Subject to all of the terms and conditions hereof and so long as no Default or Event of Default under this Agreement has occurred and is continuing, Mercantile agrees to make loans to Borrower under a Swing Line ("Swing Loans") during the Term of this Agreement which shall not in the aggregate at any time outstanding exceed the lesser of (i) the Swing Line Commitment, or (ii) the difference between (x) the sum of the Revolving Credit Commitments of all of the Lenders and the Additional Commitments of all of the Lenders (if then available) and (y) the amount of the Revolving Credit Loans and Alternate Currency Loans and the undrawn face amount of Letters of Credit then outstanding hereunder at the time of computation. The Swing Line Commitment shall be available to Borrower and may be availed of by Borrower from time to time, and borrowings thereunder may be repaid and used again during the period ending on the last day of the Term hereof. All Swing Loans shall be made hereunder only as Base Rate Loans. All advances made by Mercantile to Borrower under the Swing Line shall be evidenced by the Swing Line Note of Borrower dated as of the date hereof (the "Swing Line Note") payable to the order of Mercantile in the amount of the Swing Line Commitment and being in the form attached hereto as Exhibit B. 11. The third sentence of Section 3.4(c) of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: 7 8 In the event any payment under a Letter of Credit is made by Administrative Agent prior to receipt of payment from Borrower, such payment by Administrative Agent shall constitute a request by Borrower for a Revolving Credit Loan as a Base Rate Loan under either Section 3.1(a) or Section 3.1(b) above. 12. Section 3.12 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: 3.12 Termination or Reduction of Commitments. The Borrower may, upon three (3) Business Days' prior written notice to Administrative Agent, terminate entirely at any time, or proportionately reduce from time to time on a pro rata basis among the Lenders based on their respective Additional Commitments and/or Revolving Credit Commitments, as the case may require, by an aggregate amount of $5,000,000.00 or any larger multiple of $5,000,000.00, the unused portions of the Additional Commitments and/or Revolving Credit Commitments as specified by Borrower in such notice to Administrative Agent; provided, however, that (i) prior to March 31, 2000, all such reductions shall be applied first to any Additional Commitments and second to the Revolving Credit Commitments, (ii) at no time shall the Additional Commitments be reduced to a figure less than the total of the outstanding principal amount of Revolving Credit Loans plus the outstanding principal amount of all Swing Loans plus the outstanding principal amount of all Alternate Currency Loans, plus the face amount of all outstanding Letters of Credit then outstanding pursuant to Section 3.1(b), (iii) at no time shall the Revolving Credit Commitments be reduced to a figure less than the total of the outstanding principal amount of all Revolving Credit Loans plus the outstanding principal amount of all Swing Loans plus the outstanding principal amount of all Alternate Currency Loans, plus the face amount of all outstanding Letters of Credit then outstanding pursuant to Section 3.1(a), (iv) at no time shall the Additional Commitments be reduced to a figure greater than zero but less than $5,000,000.00, (v) at no time shall the Revolving Credit Commitments be reduced to a figure greater than zero but less than $100,000,000.00, and (vi) any such termination or reduction shall be permanent and the Borrower shall have no right to thereafter reinstate or increase the Additional Commitment or the Revolving Credit Commitment, as the case may be, of any Lender. Each Alternate Currency Borrower may, upon three Business Days prior written notice to the Alternate Currency Bank, terminate entirely at any time or reduce from time to time by an aggregate amount of $5,000,000.00 or any larger multiple of $5,000,000.00 the unused portions of the applicable Alternate Currency Commitment as specified by the applicable Alternate Currency Borrower in such notice to the Alternate Currency Bank; provided, however, that at no time shall the Alternate Currency Commitments be reduced 8 9 to a figure less than the total of the outstanding principal amount of all Alternate Currency Loans. 13. Section 3.18 of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: 3.18 Swing Loan Settlement After Default . Upon the occurrence of any Event of Default, Administrative Agent shall promptly so notify the other Lenders pursuant to Section 8 herein thereof and of the amount of the Swing Loans from Mercantile then outstanding, and each of the other Lenders agrees to immediately purchase from Mercantile with immediately available funds its Pro Rata Share of the amount of all such Swing Loans, plus accrued and unpaid interest calculated on such Pro Rata Share of such principal amount at a rate per annum equal to the Base Rate plus Applicable Margin. Such Pro Rata Shares of the Lenders shall be determined, first, based upon the then available Revolving Credit Commitments of the Lenders under Section 3.1(a) herein to the extent any portion thereof then remains unborrowed, and then based upon the Additional Commitments of the Lenders under Temporary Facility. Following such advance by each Lender to Mercantile of its Pro Rata Share of any such Swing Loans pursuant to the preceding sentence, each such Lender shall thereafter receive its Pro Rata Share of all principal payments, interest payments, fees and other amounts due with respect to such Swing Loans when paid by the Borrower to the Administrative Agent hereunder. Such Loans shall thereafter be evidenced by the Revolving Credit Notes of each of the Lenders. 14. The last sentence of Section 7.1(a) of the Credit Agreement hereby is deleted in its entirety and the following is substituted in its place: Each of the Agents and each of the Lenders are hereby authorized to deliver a copy of any financial statement or other information made available by the Borrower to any proposed assignee or participant in any portion of any Lender's Loans and its Revolving Credit Commitment and Additional Commitment, if any, hereunder and to any regulatory authority having jurisdiction over any such Agent or any such Lender, pursuant to any request therefor. 15. Schedules 6.5, 6.8, 6.15, and 7.1(k)(viii) to the Credit Agreement are hereby amended and restated in the forms of Schedules 6.5, 6.8, 6.15, and 7.1(k)(viii) attached to this First Amendment, and all references in the Credit Agreement to any of such Schedules shall on and after the date hereof refer to such Schedules in the forms attached to this First Amendment. 9 10 16. The agreements of Agent and the Lenders as set forth herein are expressly conditioned upon the following: (a) Resolutions of the Board of Directors of Borrower authorizing the increase in the Revolving Credit Commitment and the execution and delivery of this Agreement and the amended and restated Revolving Credit Notes referenced herein, which resolutions shall be certified to Agents, Co-Agents and the Lenders by the Secretary of Borrower; (b) Execution by Borrower of this Agreement and of each of the amended and restated Revolving Credit Notes in the amounts equal to the sum of the Revolving Credit Commitment and the Additional Commitment of each of the respective Lenders holding an Additional Commitment; (c) Execution by Guarantors of the Consent of Guarantors in the form attached to this Agreement; (d) Delivery to Agent and Lenders of an opinion of Borrower's counsel in form and substance satisfactory to Agent and Lenders relating to the due execution, delivery and enforceability of this Agreement and the other Transaction Documents and such other matters as Agent and Lenders may reasonably require; and (e) Payment to Administrative Agent of the fee required by the fee letter between Borrower and the Agents dated of even date herewith. 17. Borrower hereby represents and warrants to Agent and to Lenders that: (a) The execution, delivery and performance by Borrower of this First Amendment and the amended and restated Revolving Credit Notes are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and require no action by or in respect of, or filing with, any governmental or regulatory body, agency or official. The execution, delivery and performance by Borrower of this First Amendment and the amended and restated Revolving Credit Notes do not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under or result in any violation of, and Borrower is not now in default under or in violation of, the terms of the Certificate of Incorporation or Bylaws of Borrower, any applicable law, any rule, regulation, order, writ, judgment or decree of any court or governmental or regulatory agency or instrumentality, or any agreement or instrument to which Borrower is a party or by which it is bound or to which it is subject; (b) This First Amendment and the amended and restated Revolving Credit Notes have been duly executed and delivered and constitute the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms; and 10 11 (c) As of the date hereof, all of the covenants, representations and warranties of Borrower set forth in the Credit Agreement are true and correct and no "Default" or "Event of Default" (as defined therein) under or within the meaning of the Credit Agreement, as hereby amended, has occurred and is continuing. 18. The Credit Agreement, as hereby amended, the Revolving Credit Notes, as hereby amended and restated, and the other Transaction Documents are and shall remain the binding obligations of Borrower, and except to the extent amended by this First Amendment, all of the terms, provisions, conditions, agreements, covenants, representations, warranties and powers contained in the Credit Agreement, the Revolving Credit Notes and the other Transaction Documents shall be and remain in full force and effect and the same are hereby ratified and confirmed. This First Amendment amends the Credit Agreement and is not a novation thereof. 19. All references in the Credit Agreement or the other Transaction Documents to "this Agreement" and any other references of similar import shall henceforth mean the Credit Agreement as amended by this First Amendment. 20. This First Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrower may not assign, transfer or delegate any of its rights or obligations hereunder. 21. This First Amendment is made solely for the benefit of Borrower, Agent and Lenders as set forth herein, and is not intended to be relied upon or enforced by any other person or entity. 22. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER, AGENT AND LENDERS FROM ANY MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER, AGENT AND LENDERS COVERING SUCH MATTERS ARE CONTAINED IN THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH CONSTITUTE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER, AGENT AND LENDERS EXCEPT AS BORROWER, AGENT AND LENDERS MAY LATER AGREE IN WRITING TO MODIFY. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER HEREOF. 23. This First Amendment shall be governed by and construed in accordance with the internal laws of the State of Missouri. 11 12 24. In the event of any inconsistency or conflict between this First Amendment and the Credit Agreement or the other Transaction Documents, the terms, provisions and conditions of this First Amendment shall govern and control. IN WITNESS WHEREOF, the parties have caused this First Amendment to Third Amended and Restated Credit Agreement to be executed and delivered by their duly authorized officers as of the date first above written. STAFFMARK, INC. By: /s/ Terry Bellora Name: Terry Bellora Title: Chief Financial Officer ROBERT WALTERS PLC By: /s/ T.W. Chambers Name: Thomas Chambers Title: Finance Director ROBERT WALTERS TRISTAR PTY LTD. By: /s/ E. Goldhammer Name: E. Goldhammer Title: Chairman Revolving Credit Commitment: MERCANTILE BANK $39,000,000.00 NATIONAL ASSOCIATION Additional Commitment: $4,166,666.67 By: /s/ Jeffrey A. Nelson Name: Jeffrey A. Nelson Title: Vice President Address: 721 Locust Street St. Louis, Missouri 63101 Attention: Mid America Group Telecopy No: 314-418-3859
12 13 Revolving Credit Commitment: FIRST AMERICAN NATIONAL BANK D/B/A $15,000,000.00 DEPOSIT GUARANTY Additional Commitment: $0.00 By: /s/ Ronald L. Hendrix Name: Ronald L. Hendrix Title: Senior Vice President Address: 210 E. Capital Street Suite 1180 Jackson, Mississippi 39201 Attention: Ronald L. Hendrix, VP Telecopy No. 601-354-8412 Revolving Credit Commitment: THE FIRST NATIONAL BANK OF CHICAGO $39,000,000.00 Additional Commitment: $4,166,666.67 By: /s/ Jenny A. Gilpin Name: Jenny A. Gilpin Title: Vice President Address: One First National Plaza 14th Floor Mail Code IL1-0088 Chicago, Illinois 60670-0088 Attention: Jenny A. Gilpin, VP Telecopy No. (312)732-2991 Revolving Credit Commitment: FIRST UNION NATIONAL BANK $30,000,000.00 Additional Commitment: $0.00 By: /s/ Henry R. Biedrzycki Name: Henry R. Biedrzycki Title: Vice President Address: One First Union Center 301 South College Street, DC5 Charlotte, North Carolina 28288-0737 Attention: Henry R. Biedrzycki, VP Telecopy No. (704)374-3300
13 14 Revolving Credit Commitment: LASALLE NATIONAL BANK $20,000,000.00 Additional Commitment: $0.00 By: /s/ Tom Harmon Name: Tom Harmon Title: AVP Address: One Metropolitan Square 211 North Broadway Suite 2140 St. Louis, Missouri 63102 Attention: Tom Harmon, AVP Telecopy No. (314)621-1612 Revolving Credit Commitment: BANK OF AMERICA NATIONAL TRUST $30,000,000.00 AND SAVINGS ASSOCIATION Additional Commitment: $4,166,666.67 By: /s/ Kevin Leader Name: Kevin Leader Title: Managing Director Address: 555 California Street 41st Floor San Francisco, California 94104 Attention: Kevin Leader, Managing Dir. Telecopy No. (415) 622-8168 Revolving Credit Commitment: FLEET NATIONAL BANK $30,000,000.00 Additional Commitment: $4,166,666.67 By: /s/ Michael S. Houllahan Name: Michael S. Houllahan Title: Assistant Vice President Address: One Federal Street 4th Floor Boston, Massachusetts 02110 Attention: Deborah Lawrence, SVP Telecopy No. (617)346-4667
14 15 Revolving Credit Commitment: COMERICA BANK $20,000,000.00 Additional Commitment: $0.00 By: /s/ Mark Grover Name: Mark Grover Title: Vice President Address: 4100 Spring Valley Road Suite 900 Dallas, Texas 75244 Attention: Mark Grover Telecopy No. (214)818-2550 Revolving Credit Commitment: CREDIT LYONNAIS NEW YORK BRANCH $30,000,000.00 Additional Commitment: $4,166,666.66 By: /s/ Robert Ivosevich Name: Robert Ivosevich Title: Senior VP Address: 2200 Ross Avenue Dallas, Texas 75201 Attention: Robert Smith Telecopy No. (214)220-2323 Revolving Credit Commitment: HIBERNIA NATIONAL BANK $17,000,000.00 Additional Commitment: $0.00 By: /s/Angela Bentley Name: Angela Bentley Title: Portfolio Manager Address: 313 Carondelet 12th Floor New Orleans, Louisiana 70130 Attention: Angela Bentley Telecopy No. (504)533-5344
15 16 Revolving Credit Commitment: BANQUE NATIONALE DE PARIS, $15,000,000.00 HOUSTON AGENCY Additional Commitment: $0.00 By: /s/ Warren G. Parham Name: Warren G. Parham Title: Vice President Address: 333 Clay Street, Suite 3400 Houston, Texas 77002 Attention: Warren G. Parham Telecopy No. (713) 659-1414 Revolving Credit Commitment: WACHOVIA BANK, N.A. $15,000,000.00 Additional Commitment: $4,166,666.66 By: /s/ Ken Washington Name: Ken Washington Title: Vice President Address: 191 Peachtree N.E. Atlanta, Georgia 30303 Attention: Ken Washington Telecopy No. (404) 332-5016 MERCANTILE BANK NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT By: /s/ Jeffrey A. Nelson Name: Jeffrey A. Nelson Title: Vice President Address: 721 Locust Street St. Louis, Missouri 63101 Attention: Mid America Group Telecopy No: 314-418-3859
16 17 THE FIRST NATIONAL BANK OF CHICAGO, AS SYNDICATION AGENT By: /s/ Jenny A. Gilpin Name: Jenny A. Gilpin Title: VP Address: One First National Plaza, 14th Floor Mail Code IL1-0088 Chicago, Illinois 60670-0088 Attention: Jenny A. Gilpin, VP Telecopy No. (312)732-2991 CREDIT LYONNAIS NEW YORK BRANCH, AS CO-AGENT By: /s/ Robert Ivosevich Name: Robert Ivosevich Title: Senior Vice President Address: 2200 Ross Avenue Dallas, Texas 75201 Attention: Robert Smith Telecopy No. (214)220-2323 FIRST UNION NATIONAL BANK, AS CO-AGENT By: /s/ Henry R. Biedrzycki Name: Henry R. Biedrzycki Title: VP Address: One First Union Center 301 South College Street, DC5 Charlotte, North Carolina 28288-0737 Attention: Henry R. Biedrzycki, VP Telecopy No. (704)374-3300
17 18 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS CO-AGENT By: /s/ Kevin Leader Name: Kevin Leader Title: Managing Director Address: 555 California Street 41st Floor San Francisco, California 94104 Attention: Kevin Leader, Managing Dir. Telecopy No. (415) 622-8168 FLEET NATIONAL BANK, AS CO-AGENT By: /s/ Michael S. Houllahan Name: /s/ Michael S. Houllahan Title: Assistant Vice President Address: One Federal Street 4th Floor Boston, Massachusetts 02110 Attention: Deborah Lawrence, SVP Telecopy No. (617)346-4667
18 EX-10.31 4 LEASE AGREEMENT DATED JUNE 2, 1999 1 Exhibit 10.31 COMMERCIAL LEASE AGREEMENT WITH OPTION TO RENEW AND RIGHT OF FIRST REFUSAL THIS COMMERCIAL LEASE AGREEMENT WITH OPTION TO RENEW AND RIGHT OF FIRST REFUSAL (the "Lease") is entered into on the 2nd day of June, 1999, and is effective July 1, 1999, by and between BREWER INVESTMENTS II, LC, a limited liability company organized under and by virtue of the laws of the State of Arkansas, (hereinafter referred to as "Lessor"), and STAFFMARK, INC., a Delaware corporation, (hereinafter referred to as "Lessee"), wherein the following mutual covenants and understandings are made and entered into upon the following terms and conditions: W-I-T-N-E-S-S-E-T-H SECTION ONE SUBJECT OF LEASE Lessor hereby lets and leases unto Lessee, and Lessee accepts from Lessor, subject to the terms and conditions contained herein, the property and improvements located at 234 and 302 East Millsap, along with the adjacent parking lot, Fayetteville, Washington County, Arkansas, said property being more specifically described in the attached Exhibit "A" which is incorporated herein by reference (hereinafter referred to as the "Premises"); provided, however, that the execution of this Lease by and between Lessor and Lessee with respect to the property at 302 East Millsap, Fayetteville, Arkansas, will immediately terminate that certain lease dated January 15, 1996, by and between Lessor and Lessee (the "Prior Lease") without any further obligation or liability by either party with respect to the Prior Lease. SECTION TWO TERM The Premises are hereby leased to Lessee for an initial period of ten (10) years, commencing at 12:01 a.m. on the 1st day of July, 1999, and ending at 12:01 a.m. on the 30th day of, June 2009, (hereinafter referred to as the "Lease Term"). SECTION THREE RENTAL AMOUNT The monthly rental payment for the Lease Term shall be payable as set forth below in advance on the 1st day of each month, with the first payment being due on or before the date of the signing of this Lease, with the first month's rent being prorated as of the date the Lease is signed. The Lessee agrees to pay to Lessor as monthly rental the following amounts for the following portions of the Lease Term: 1 2 1. Year 1: July 1, 1999 through June 31, 2000 the sum of $48,791.00 per month; 2. Years 2 - 5: July 1, 2000 through June 30, 2004 the sum of $58,938.00 per month ($13.58/sq. ft.); and 3. Years 6 - 10: July 1, 2004 through June 30, 2009 the sum of $65,078.00 per month ($15.00/sq. ft.) 10 year average = $14.06/sq. ft. SECTION FOUR LIENS Lessee shall not encumber the Premises or any buildings thereon and shall keep the Premises free and clear of any and all mechanic's, laborer's, materialmen's, and other liens arising out of or in connection with any work or labor done, services performed, or materials or appliances used or furnished for or in connection with any operations of Lessee, any alteration, improvement, or repairs or additions which Lessee may make or permit or cause to be made, or any work or construction, by, for, or permitted by Lessee on or about the Premises, or any obligations of any kind incurred by Lessee, and at all times promptly and fully to pay and discharge any and all claims on which any such lien may or could be based, and to indemnify Lessor and all of the Premises against all such liens and claims of liens and suits or other proceedings pertaining thereto. SECTION FIVE ASSIGNMENT AND SUBLEASE Lessee shall not assign any rights, duties or privileges under this Lease, nor allow any other person to occupy or use the Premises (other than invitees of Lessee who are present at the same time the Lessee are present) without the prior written consent of Lessor, which consent shall not be unreasonably withheld. A consent to one assignment, sublease, occupation or use by any other person or entity shall not be a consent to any subsequent assignment, sublease, occupation or use by any other person or entity, nor will such consent release the Lessee from any of Lessee's obligations hereunder. Any assignment or subletting without the prior written consent of Lessor shall be void, and shall, at the option of the Lessor, terminate this Lease. Further, Lessor shall have any and all remedies for such breach as specified in Section Seventeen, Breach or Default. The terms of this Section shall also apply to unpermitted assignments as specified in Section 29 Lessee Further Assignment Restriction. SECTION SIX WARRANTIES OF TITLE AND QUIET POSSESSION Lessor covenants that it has the right to make this Lease, and that Lessee shall have the quiet and peaceable possession of the Premises during the Lease Term. 2 3 SECTION SEVEN WASTE AND NUISANCE PROHIBITED During the Lease Term and any renewals or extensions, Lessee shall comply with all laws applicable to Lessee's operation of business on the Premises, the breach of which might result in any penalty on Lessor or forfeiture of Lessor's title to the Premises. Lessee shall not commit, or suffer to be committed, any waste on the Premises or any nuisance. SECTION EIGHT LESSOR'S RIGHTS OF ENTRY Lessee shall permit Lessor or Lessor's agents to enter into and upon the Premises at all reasonable times during normal business hours, upon prior reasonable notice, for the purpose of inspecting the same; provided, however, that Lessor shall not interfere with the privacy rights or treatment of any of Lessee's patrons while in the Premises, or otherwise disrupt Lessee's business operations. SECTION NINE UTILITIES AND COSTS Lessee shall fully and promptly pay all water, electricity, gas, telephone service, and other public utilities furnished to the Premises throughout the Lease Term, including any renewals or extensions, hereof. In addition, Lessee shall pay for any and all costs and expenses of every kind associated with the operation of Lessee's business on the Premises. SECTION TEN TRADE FIXTURES All trade fixtures installed by Lessee or acquired by Lessee independently of this Lease shall remain the Lessee's property and may be removed by Lessee at the expiration or termination of this Lease; provided, however, that Lessee shall restore the Premises and repair any damage thereto caused by such removal. SECTION ELEVEN LESSEE'S MAINTENANCE AND REPAIR OF PREMISES Lessee has inspected the Premises, and acknowledges by signing hereinafter that the Premises are now in a tenantable condition. Lessee, at Lessee's expense, shall keep the Premises in good order, condition and repair, ordinary wear and tear excepted, and shall promptly make all repairs and replacements of every kind and nature, to the Premises, including, without limitation, repairs to the building walls or roof and normal maintenance on the heating and air conditioning and plumbing. In the event that Lessee fails to promptly and properly make all repairs and replacements to the Premises, of every kind and nature, as required herein Lessor may do so, at Lessor's sole option, in which event the cost of said repairs and replacements paid by Lessor shall become immediately due and payable by Lessee to Lessor, with such amounts bearing interest at the maximum lawful rate. Lessee shall take good care in the use of the Premises and Lessee shall not alter, repair, modify, or construct additions or improvements or change the Premises without the prior written consent of Lessor; 3 4 provided, however, that Lessor's written consent will not be unreasonably withheld. Lessee, at Lessee's expense, may make any additions, modifications, and repairs which are needed to comply with any licensing requirements, health and safety regulations, or other requirements or regulations associated with Lessee's use and occupancy of the Premises. Any alterations, improvements and changes the Lessee may desire or need shall be done at the expense of Lessee and shall become the property of Lessor and remain on the Premises. Lessee shall, at the termination of this Lease, surrender the Premises to Lessor in as good condition and repair as reasonable and proper use thereof will permit, ordinary wear and tear, damage or destruction by fire, flood, storm, civil commotion, or other unavoidable cause or Acts of God excepted. Lessor shall not be responsible for any additions, replacements or repairs except those which Lessor may specifically assume in writing. SECTION TWELVE SIGNS No sign, picture, advertisement, or notice, except existing signs and those displayed on the glass of the doors or windows, shall be displayed on any part of the outside of said building or on or about the Premises hereby demised without the prior written consent of the Lessor, (which consent shall not be unreasonably withheld) or without compliance, with all applicable laws, ordinances and regulations of the appropriate governmental authority. The Lessor may only remove the same without notice to the Lessee and at Lessee's expense if Lessor did not provide its prior written consent to sign, picture, advertisement or notice in question, or if Lessee failed to comply with all applicable laws, ordinances and regulations of the appropriate governmental authority. Upon termination of this Lease, Lessee will remove any sign, advertisement or notice painted on or affixed to the Premises, and return the place it occupied to the condition which existed as of the date this Lease takes effect. SECTION THIRTEEN TAXES Lessee shall pay all ad valorem real property taxes and assessments due to improvement districts or governmental bodies which may be levied, assessed or charged against the Premises. Should Lessee fail to timely pay all taxes and assessments due hereunder, Lessor may do so at Lessor's sole option, in which event the amount of said taxes or assessments, along with all interest, penalties and related costs (including attorney's fees) paid by Lessor shall become immediately due and payable by Lessee to Lessor, bearing interest at the maximum lawful rate. Lessee shall also be responsible for assessing and paying the personal property taxes on any personal property of Lessee located on or about the Premises and for all license, privilege and occupation taxes levied, assessed or charged against the Lessee on account of the operation of the business on the Premises. Lessee shall provide written evidence of payment of said taxes to Lessor as soon as practicable following payment, but in no event later than thirty (30) days from said payment. 4 5 SECTION FOURTEEN INSURANCE Lessee shall, at Lessee's expense, at all times during the Lease Term and any renewals or extensions hereof, maintain in force a policy or policies of insurance, written by one or more responsible insurance carriers acceptable to Lessor, which will insure Lessor and Lessee against liability for injury to or death of persons or loss or damage to property occurring in or about the Premises. The limits of liability coverage under such insurance shall not be less than $2,000,000.00 per person, $4,000,000.00 per occurrence, and $4,000,000.00 coverage for property damage, with Lessor named insured in such policies. In addition, Lessee shall, at Lessee's expense, at all times during the Lease Term and any renewals or extensions hereof, keep insured all buildings and improvements on the Premises against all losses or damage by fire and other casualty, in such amounts (no less than replacement value) and under such form of policies as shall be acceptable to, or requested by, the Lessor, with Lessor and Lessee named as insured parties, and with standard Mortgagee coverage in favor of all persons who may hold mortgages on the Premises. A certificate of such insurance shall be delivered to Lessor within twenty (20) business days following execution of this Lease. Lessee shall not do or permit to be done anything which will make uninsurable the Premises or any part thereof. Lessee, during the Lease Term and any renewals or extensions hereof, shall be responsible for insuring the contents of the Premises, including, without limitation, all of Lessee's personal property located on the Premises. Lessee shall provide Lessor with written proof of all of the above described insurance coverage at all times, and inform Lessor of any lapse, deficiency or cancellation, or any notices thereof immediately. Should Lessee fail to keep in effect and pay such insurance as it is, in this Section, required to be maintained, Lessor may do so, at Lessor's sole option, in which event the insurance premiums paid by Lessor shall become immediately due and payable by Lessee to Lessor, with such amounts bearing interest at the maximum lawful rate. SECTION FIFTEEN INDEMNIFICATION OF LESSOR Notwithstanding the existence of any insurance provided for in this Lease, Lessee shall indemnify and hold Lessor harmless from and against any and all claims, damages, causes of action, expenses, costs, and liabilities of any nature which are asserted against Lessor arising out of any breach of this Lease by Lessee, Lessee's agents, employees, customers, visitors or licensees, as a result of Lessee's use or occupancy of the Premises, or as a result of the negligence or willful misconduct of Lessee, Lessee's agents, employees, customers, visitors or licensees; provided, however, that Lessee shall not be responsible for damages, costs, claims, causes of action and liabilities of any nature arising out of the negligence or willful misconduct of the Lessor, Lessor's agents, employees and/or visitors. SECTION SIXTEEN DAMAGE BY FIRE OR OTHER CASUALTY During the Lease Term and any renewals or extensions hereof, if the improvements on the Premises, or any part thereof, be rendered unfit for occupancy for the purposes for which they are hereby let, from any cause covered by Lessee's casualty insurance, to an extent repairable within one hundred and 5 6 eighty (180) days from the date of such damage subject to compliance with the laws and regulations of applicable governmental authorities, the Lessor will repair the Premises for the use of the Lessee using said insurance proceeds, and the Lease shall continue in full force and effect, except that, as the sole and exclusive remedy of the Lessee, there shall be a proportionate abatement in the monthly rental payable by the Lessee during the time the Premises are untenantable or in part untenantable. Any proportionate reduction shall be based on the extent to which the making of repairs shall interfere with the business carried on by Lessee on the Premises; provided, however, that if the repairs cannot be made within the time frame stated above, or if the cost of replacing or repairing the improvements so damaged upon the Premises equals or exceeds fifty percent (50%) of the property damage insurance coverage maintained by Lessee thereon, Lessor may, at its option, terminate this Lease and in such event, Lessee shall be entitled to a proportionate rebate of the monthly rental based upon number of days remaining for the month in which the monthly rental has been paid, and thereafter Lessee shall have no further liability or obligation to Lessor under this Lease, except those arising prior to such termination. Otherwise, the Lessor will repair the Premises for the use of the Lessee using said insurance proceeds as stated herein, and the Lease shall continue in full force and effect, except that, as the sole and exclusive remedy of the Lessee, there shall be a proportionate abatement in the rent payable by the Lessee during the time the Premises are untenantable or in part untenantable. Lessor shall in no way be liable or responsible for any damage to any property of the Lessee in or about the Premises by reason of flood, water, fire, windstorm or other casualty or act of nature. SECTION SEVENTEEN BREACH OR DEFAULT A. Events of Default. Lessee shall have breached this Lease and shall be considered in default hereunder if, during the Lease Term or any extension or renewal thereof: (a) the Lessee files a petition in bankruptcy or insolvency or for reorganization under any bankruptcy act, or makes an assignment for the benefit of creditors which is not released within thirty (30) days; (b) involuntary proceedings are instituted against the Lessee under any bankruptcy act, and such proceedings are not dismissed within thirty (30) days of the filing thereof; (c) Lessee abandons or vacates said Premises before the end of the term of this Lease; (d) Lessee suffers the rent to be more than ten (10) days in arrears with such failure to pay continuing for a period of twenty (20) days; or (e) Lessee fails to perform or comply with any of the material covenants, terms, provisions or conditions of this Lease and such failure continues for a period of ten (10) days following written notice from the Lessor to Lessee of such failure to materially perform or comply. B. Remedies in Event of Default. In the event of a default under this Lease which is continuing and has not been cured in accordance with the prior paragraph of this Section 17 Breach or Default by Lessee, and subject to the provisions of subsection C. Grace Period for Unpermitted Assignment Pursuant to Section 29 below, Lessor shall have the option to declare all remaining monthly rental payments due hereunder for the balance of the then current Lease Term or Renewal Term to be immediately due and payable without further notice or demand, and the same shall thereafter bear interest at the maximum rate allowed by law until paid. In addition to the foregoing, but again subject to subsection C. Grace Period for Unpermitted Assignment Pursuant to Section 29, the Lessor may pursue any and all other remedies available to Lessor at law or in equity, including without limitation, either or both of the following actions: (a) Lessor may terminate this Lease and the use of the Premises by Lessee, and Lessor shall have the right to enter upon and take possession of the Premises, with or without notice to 6 7 Lessee, and to evict and expel Lessee and any or all of Lessee's property, without legal process and without thereby being guilty of any manner of trespass either at law or in equity; and in such event, any or all property left in and about the Premises shall be considered abandoned and Lessor may remove and dispose of any and all such property as Lessor sees fit without any recourse by Lessee, pursuant to the provisions of Arkansas law. Lessee shall be responsible for all costs of moving, storing and disposing of said property; or (b) Lessor may enter said Premises as the agent of Lessee, without notice or legal process and without being liable for any manner of trespass, and relet the Premises, as the agent of Lessee, with or without Lessee's property or fixtures that may be therein, at such price and upon such terms and for such duration of time as the Lessor may determine, and receive the rent therefor, applying the same to any costs or expenses incurred by Lessor as a result of Lessee's default under the Lease, including but not limited to leasing and brokerage fees, attorneys' fees, and construction expenses relating to reletting the Premises. If the full amount due hereunder shall not be realized by Lessor over and above the expenses to Lessor in such reletting, the said Lessee shall pay any deficiency upon Lessor's written demand, and in no event shall Lessee be entitled to any excess of rent (or rent plus other sums) obtained by reletting over and above any and all amounts due hereunder from Lessee to Lessor. Lessee understands and consents that if a default under Section 17 Breach or Default has occurred, is continuing and/or has not been cured, that pursuant to Arkansas law, all property placed on the Premises by Lessee is hereby subjected to a lien in favor of Lessor for the payment of all sums agreed to be paid by Lessee under this Lease which lien, if any, will be subject to prior liens, if any, on such property of Lessee by creditors of Lessee. In any of the foregoing circumstances, including but not limited to Lessor's remedy of acceleration of remaining monthly rental payments, Lessor shall have the duty to mitigate any and all damages in favor of Lessee. It is expressly agreed that in addition to the remedies specified herein in the event of a default, Lessee shall also be liable for and shall pay to Lessor, in addition to any sum provided to be paid hereunder, upon written demand, any and all other sums incurred by Lessor in connection with such default or reletting the Premises, including without limitation: reasonable attorney's fees; broker's fees incurred by Lessor in connection with reletting the whole or any part of the Premises; the costs of removing and storing Lessee's or other occupant's property; the costs of repairing, altering, remodeling or otherwise putting the Premises into condition reasonably acceptable to a new tenant or tenants, and all other reasonable out of pocket expenses incurred by Lessor in enforcing Lessor's remedies. C. Grace Period for Unpermitted Assignment Pursuant to Section 29. In the event that the default is the result of an assignment under Section 29 Lessee Further Assignment Restriction, for which Lessor has not provided its consent, Lessor shall elect to accelerate all remaining monthly payments as specified above, and Lessor agrees not to exercise any other remedies available to Lessor for a period of one hundred and eighty (180) days following the date of such default (the "Grace Period"), and during such time Lessee shall be entitled to remain in possession of the Premises, so long as Lessee continues to make monthly rental payments on a timely basis to Lessor in accordance with this Lease during the Grace Period, as if no unpermitted assignment had occurred. In order to cure such a default, on or before the last day of the Grace Period Lessee shall: 7 8 (a) pay the accelerated aggregate rental amount of the then remaining current Least Term or Renewal Term, as applicable, and in such event the default shall have been cured and Lessee shall be entitled to remain in possession of the Premises without any further rental or related obligation being owed to Lessor through and until the expiration of the then current Lease Term or Renewal Term, as applicable; or (b) satisfy Lessor to Lessor's reasonable satisfaction that the default is cured other than with respect to payment of the accelerated aggregate rental amount, and in such event the default shall have been cured, with Lessee continuing to be responsible for all of its obligations under this Lease, including the monthly payment of rent through the expiration of the Lease Term or the Renewal Term, as applicable. If upon the expiration of the Grace Period Lessee has failed to pay the accelerated aggregate rental amount or is not able to otherwise cure the default relating to the unpermitted assignment to Lessor's reasonable satisfaction, then Lessor shall be free to elect any and all remedies against Lessee as provided in this Section 17 Breach or Default. SECTION EIGHTEEN EMINENT DOMAIN If the Premises be subjected to any eminent domain proceedings, the Lease shall terminate if all of the Premises are taken or if the portion taken is so extensive that the residue is wholly inadequate for Lessee to carry on Lessee's business and neither party shall have any further obligations or liabilities to the other, except those arising prior to termination. If the taking be partial, then Lessee's rental shall be reduced in the proportion which the value of the property taken bears to the whole value of the Premises originally leased. In such condemnation proceedings Lessee may claim compensation for the taking of any removable installations which by the terms of this Lease Lessee would be permitted to remove at the expiration of this Lease, but Lessee shall be entitled to no additional award, it being agreed that all damages allocable to full fee simple ownership of the entire Premises shall in any event be payable to Lessor. SECTION NINETEEN PARTIES BOUND The covenants and conditions contained herein shall, subject to the provisions as to assignment, transfer and subletting, apply to and bind the successors and assigns of the parties hereto. 8 9 SECTION TWENTY NOTICES Any notices provided for herein will be deemed to have been given when deposited by certified mail, return receipt requested, postage prepaid, addressed to the parties as follows: To Lessor: Brewer Investments II, LC Attn: Jerry Brewer 2683 Joyce Blvd. Fayetteville, AR 72703 To Lessee: Staffmark, Inc. Attn: Gordon Allison 302 E. Milsap Fayetteville, AR 72703 SECTION TWENTY-ONE SUBORDINATION AND ATTORNMENT The Lessee hereby subordinates this Lease to any mortgage, deed of trust or encumbrance which the Lessor may have placed, or may hereafter place, on the Premises or any part thereof. Lessor agrees that Lessee may file a Memorandum of Lease in the form attached hereto as Exhibit ___. Lessee agrees to execute, on demand, any instrument which may be deemed reasonably necessary to render such mortgage, deed of trust, or encumbrance, whenever made, superior and prior to this Lease. In the event that Lessee refuses or fails to do so, Lessor is hereby appointed Lessee's attorney-in-fact to execute such instrument in the name of Lessee and as the act and deed of Lessee, and this authority is hereby declared to be coupled with an interest and irrevocable by Lessee during the Lease Term and any extension or renewal thereof. Further, Lessee shall, in the event any proceedings are brought for the foreclosure of, or in the event of the exercise of the power of sale under, any mortgage made by Lessor covering any part of the Premises, attorn to the purchaser upon any such foreclosure or any other sale and recognize such purchaser as Lessor under this Lease. SECTION TWENTY-TWO MERGER This Lease Agreement with Option to Renew and Right of First Refusal contains the entire agreement between the parties and supersedes any prior or contemporaneous oral or written agreements which supplement or contradict the terms and provisions set forth herein. SECTION TWENTY-THREE ATTORNEY'S FEES If any legal action shall be brought to recover any rent or enforce any right under the terms of this Lease or for a default hereunder, the prevailing party shall be entitled to recover from the other party any reasonable costs of collection and attorneys' fees incurred as a consequence of enforcing the provisions of the Lease, the amount of which shall be fixed by the Court and shall be made a part of the judgment or decree rendered. 9 10 SECTION TWENTY-FOUR PROVISIONS SEPARABLE In the event any one or more of the provisions contained in this Lease shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the remaining provisions of this Lease and this Lease shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein. SECTION TWENTY-FIVE CONSENT OR WAIVER OF BREACH The consent of either party to any act or the waiver by either party of a breach of any provision of this Lease shall not operate or be construed as a consent or waiver of any subsequent act or breach by the other party. Further, the receipt by Lessor of any rental payment due hereunder with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. No provision of this Lease shall be deemed to have been waived by Lessor or Lessee unless such waiver is in writing signed by Lessor or Lessee, as the case may be. SECTION TWENTY-SIX ENVIRONMENTAL MATTERS Lessee hereby covenants that it will not manufacture at or install in the Premises any hazardous or toxic materials subject to regulation by State or Federal law or regulations during the Lease Term. Lessee shall indemnify and hold Lessor harmless from any and all claims, losses, damages, penalties, fines, expenses (including reasonable attorney's fees) and liabilities whatsoever arising out of or relating to the presence, handling, treatment, removal, cleanup or incident of any such hazardous or toxic materials by Lessee. SECTION TWENTY-SEVEN CONDUCT OF BUSINESS AND USES The Premises are leased to Lessee for the purpose of carrying on the business of human resources, temporary staffing, training and consulting business, uses related thereto and corporate headquarters for a publicly held company and related matters. Lessee covenants unto Lessor that the Premises will be used for those purposes, and those related to them, and no other, except with the prior written consent of Lessor. Lessee covenants and agrees that Lessee will not do or permit to be done anything in, upon, or about the Premises that increases the hazard of fire beyond that which exists by reason of use and occupancy of the Premises for the purposes mentioned. Further, Lessee will not do or permit to be done anything within Lessee's control which would make the Premises or the improvements thereon uninsurable in whole or in part. SECTION TWENTY-EIGHT MISCELLANEOUS A. Time shall be of the essence with respect to every term and condition of this Lease. 10 11 B. In the event that any rental payment to be made under the terms of this Lease is not paid on or before the tenth (10) day of each month, Lessee agrees to pay a late charge equal to five percent (5%) of said past due rental payment. C. This Lease may be amended or modified only by an instrument in writing duly executed by all parties hereto or their successors. D. This Lease may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall be deemed one instrument. E. All trash and refuse deposited outside the building on the Premises must be placed in sufficient receptacles to be furnished by Lessee and approved by the appropriate governmental officials or bodies for the City of Fayetteville, Arkansas. SECTION TWENTY-NINE LESSEE FURTHER ASSIGNMENT RESTRICTION In the event that Lessee is a corporation, partnership, limited liability company or other form of business entity, and during the Lease Term, or any renewal or extension thereof, any of the following changes shall occur, this shall constitute an assignment of this Lease, which requires the prior written consent of Lessor pursuant to Section Five, Assignment and Sublease (which as stated in Section 5 shall not be unreasonably withheld by Lessor): A. a merger, consolidation, or recapitalization occurs where the Lessee is not the surviving business entity; B. (i) a stock purchase, tender offer, exchange offer, merger or open market purchases of Lessee's common stock by an individual, entity or related group occur during a consecutive 180 day period; and (ii) pursuant to the applicable transaction in (i) upon its consummation, a change in ownership or voting control of the Lessee occurs with respect to a majority of Lessee's outstanding voting common shares; C. a sale of substantially all of the assets of Lessee and its subsidiaries taken as a whole; or D. there shall occur any change whereby an individual, partnership, limited liability company, corporation or other entity or related group acquires the ownership of, or the power to vote, a majority of the outstanding voting common shares of stock of the Lessee. Provided, however, that the acquisition of all of the outstanding shares of stock of the Lessee by any corporation, limited partnership or limited liability company a class of whose common stock or interests, as applicable, is/are registered under the Securities Exchange Act of 1934, as amended, shall not be deemed 11 12 an assignment of this Lease pursuant to Section 5 Assignment and Sublease, if and only if the acquiring entity becomes a party to this Lease or becomes an unconditional guarantor of this Lease. SECTION THIRTY RENEWAL TERMS If the Lessee shall have materially performed every agreement and covenant on Lessee's part to have been kept and performed under covenants, terms and conditions of this Lease, and any amendments thereto, and is not in breach or default of this Lease at the time of exercise and at the time of renewal, including all renewals or extensions hereof, then upon the expiration of the Lease Term, or the then current Renewal Term, Lessee shall have the option to renew this Lease in the Premises for two (2) additional terms of five (5) years as the parties shall agree, with each renewal period being referred to herein as the "Renewal Term," subject to the following provisions: A. Notice of the exercise of the option to renew must be given in writing to Lessor, pursuant to the notice provisions of this Lease, not later than six (6) months prior to the end of the original Lease Term, or the then current Renewal Term agreed to by the parties, as applicable. B. Should the Lessee exercise the options to renew granted herein, this Lease shall be extended on the same terms and conditions as set forth herein, during each Renewal Term, with the exception of the monthly rental payments as set forth below. C. The amount of the monthly rental payment for each Renewal Term shall be the lessor of: (1) 1/2 of the Previous Year CPI increase times the monthly lease payment over the last monthly lease payment of the initial Lease Term; or (2) the fair market value of rentals of similar and comparable properties in the Fayetteville/Springdale Area as detained in a written report by an appraiser unaffiliated with either Lessor or Lessee. D. The right of first refusal described in Section Thirty-One of this Lease shall be renewed and extended during the Renewal Terms. SECTION THIRTY-ONE RIGHT OF FIRST REFUSAL If the Lessee shall have materially performed every agreement and covenant on Lessee's part to have been kept and performed under the terms and conditions of this Lease and is not in breach or default of this Lease at the time of exercise, Lessee shall be granted a right of first refusal on the following terms and conditions, to purchase the Premises: A. The Lessee's right of first refusal to purchase the Premises shall exist during the initial Lease Term as described in Section Two of this Lease and any Renewal Term specified in Section Thirty of this Lease. B. In the event that the Lessor shall receive a bona fide offer from a third party to purchase the Premises or if the Lessor shall decide 12 13 to sell the Premises, Lessor shall give Lessee a written offer to sell the Premises to the Lessee, setting forth the price and the terms of sale, as set forth in the offer received by Lessor from the potential third party purchaser of the Premises, or the Lessor's offer to sell the Premises. C. In either event, Lessor shall send the written offer to Lessee at the address required under Section Twenty for notices by Certified Mail, requiring Lessee to accept the offer in writing and to sign a suitable contract to purchase the Premises within the period of thirty (30) business days after the mailing of the notice. D. The failure of Lessee to accept the offer to purchase or sign a contract within the period provided herein shall nullify and void this right of first refusal to Lessee, and Lessor shall be at liberty to sell the Premises to any other person, firm, corporation or other entity, at the price and on the terms offered to Lessee. SECTION THIRTY-TWO APPLICABLE LAW This Lease shall be construed in accordance with and governed by the laws of the State of Arkansas applicable to agreements made and to be performed wholly within such jurisdiction with regard to the conflicts of laws provisions thereof. The Courts of the State of Arkansas for Washington County, and the Federal Courts for the Western District of Arkansas shall have jurisdiction over any and all disputes which arise between the parties under this Agreement, whether in law or in equity, and each of the parties shall submit and hereby consents to such Court's exercise of jurisdiction. IN WITNESS WHEREOF, the parties have executed this Commercial Lease Agreement with Option to Renew and Right of First Refusal on this 2nd day of June, 1999. LESSOR: BREWER INVESTMENTS II, LC , AN ARKANSAS LIMITED LIABILITY COMPANY BY: /S/ JERRY T. BREWER ------------------- JERRY T. BREWER, MANAGER LESSEE: STAFFMARK, INC., A DELAWARE CORPORATION BY: /S/ TERRY BELLORA ----------------- TERRY BELLORA CHIEF FINANCIAL OFFICER 13 14 - ------------------------------------------------------------------------------- ACKNOWLEDGMENT STATE OF ARKANSAS ) ) ss. COUNTY OF WASHINGTON ) On this date, before the undersigned, a Notary Public, duly commissioned, qualified and acting, within and for the said County and State, appeared in person the within named JERRY T. BREWER to me personally known, who stated that he was the Manger of BREWER INVESTMENTS II, LC an Arkansas Limited Liability Company, and was duly authorized in his capacity to execute the foregoing instrument for and in the name and behalf of said company, and further stated and acknowledged that he had so signed, executed and delivered said instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this 2nd day of June, 1999. My Commission Expires: /s/ Kathy McNeeley ------------------ Notary Public 7-24-07 CORPORATE ACKNOWLEDGMENT STATE OF ARKANSAS ) ) ss. COUNTY OF WASHINGTON ) On this date, before the undersigned, a Notary Public, duly commissioned, qualified and acting, within and for the said County and State, appeared in person the within named TERRY BELLORA to me personally known, who stated that he was the Chief Financial Officer of STAFFMARK, INC., a Delaware Corporation, and was duly authorized in his capacity to execute the foregoing instrument for and in the name and behalf of said company, and further stated and acknowledged that he had so signed, executed and delivered said instrument for the consideration, uses and purposes therein mentioned and set forth. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this 2nd day of June, 1999. My Commission Expires: /s/Kathy McNeeley ----------------- Notary Public 7-24-07 14 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 9,656 0 190,128 4,672 0 211,589 39,388 12,043 675,573 92,364 0 0 0 292 276,884 675,573 584,584 584,584 437,384 112,385 237 0 7,503 27,075 9,909 17,166 0 0 0 17,166 0.59 0.58
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