-----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, HwPYUBOo7H+gugGM4nKtmYZ2+d9exNlD6oxllFipByr+1io8AuRdJL+1KWaxfoIA GJeBfIi/1aBITungw9NvXA== 0000924646-01-500007.txt : 20010809 0000924646-01-500007.hdr.sgml : 20010809 ACCESSION NUMBER: 0000924646-01-500007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODIS PROFESSIONAL SERVICES INC CENTRAL INDEX KEY: 0000924646 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 593116655 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24484 FILM NUMBER: 1700901 BUSINESS ADDRESS: STREET 1: 1 INDEPENDENT DR CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043602000 MAIL ADDRESS: STREET 1: 1 INDEPENDENT DR CITY: JACKSONVILLE STATE: FL ZIP: 32202 FORMER COMPANY: FORMER CONFORMED NAME: ACCUSTAFF INC DATE OF NAME CHANGE: 19940606 10-Q 1 asciiform10qq201.txt FORM 10-Q FOR THE PERIOD ENDED 6/30/01 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 2001 OR |_| 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: 0-24484 Modis Professional Services, Inc. (Exact name of Registrant as specified in its charter) Florida 59-3116655 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1 Independent Drive Jacksonville, Florida 32202 (Address of principal executive offices) (Zip code) (904) 360-2000 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. July 31, 2001. Common Stock, $0.01 par value Outstanding: 97,742,653 (No. of shares) FORWARD LOOKING STATEMENTS This report on Form 10-Q contains forward-looking statements that are subject to certain risks, uncertainties or assumptions and may be affected by certain other factors, including but not limited to the specific factors discussed in Part I, Item 2 under 'Liquidity and Capital Resources', 'Seasonality', and 'Factors Which May Impact Future Results and Financial Condition'. In some cases, you can identify forward-looking statements by terminology such as 'will,' 'may,' 'should,' 'could,' 'expects,' 'plans,' 'indicates,' 'projects,' 'anticipates,' 'believes,' 'estimates,' 'appears,' 'predicts,' 'potential,' 'continues,' 'would,' or 'become' or the negative of these terms or other comparable terminology. In addition, except for historical facts, all information provided in Part I, Item 3, under 'Quantitative and Qualitative Disclosures About Market Risk' should be considered forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on beliefs and assumptions of the Company's management and on information currently available to such management. Forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.
Modis Professional Services, Inc. and Subsidiaries Index Part I Financial Information Item 1 Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2001 (unaudited) and December 31, 2000.............................................................................. 3 Unaudited Condensed Consolidated Statements of Income for the Three and Six Months ended June 30, 2001 and 2000....................................................................... 4 Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2001 and 2000....................................................................... 5 Unaudited Notes to Condensed Consolidated Financial Statements......................................... 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 11 Item 3 Quantitative and Qualitative Disclosures About Market Risks............................................ 18 Part II Other Information Item 1 Legal Proceedings...................................................................................... 20 Item 2 Changes in Securities and Use of Proceeds.............................................................. 20 Item 3 Defaults Upon Senior Securities........................................................................ 20 Item 4 Submission of Matters to a Vote of Security Holders.................................................... 20 Item 5 Other Information...................................................................................... 21 Item 6 Exhibits and Reports on Form 8-K....................................................................... 21 Signatures............................................................................................. 22 Exhibits
2 Part I. Financial Information Item 1. Financial Statements Modis Professional Services, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
June 30, December 31, (dollar amounts in thousands except per share amounts) 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 16,907 $ 5,013 Accounts receivable, net 307,376 340,827 Prepaid expenses 11,686 9,404 Deferred income taxes 7,477 6,687 Other 10,906 10,376 ---------------------------------- Total current assets 354,352 372,307 Furniture, equipment and leasehold improvements, net 55,863 55,711 Goodwill, net 1,183,256 1,199,849 Other assets, net 26,301 25,693 ---------------------------------- Total assets $ 1,619,772 $ 1,653,560 ================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 6,836 $ 24,719 Accounts payable and accrued expenses 51,500 50,648 Accrued payroll and related taxes 40,134 41,540 Income taxes payable 871 7,012 ---------------------------------- Total current liabilities 99,341 123,919 Notes payable, long-term portion 174,000 194,000 Deferred income taxes 37,726 28,584 Other 4,740 3,839 ---------------------------------- Total liabilities 315,807 350,342 ---------------------------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding - - Common stock, $.01 par value; 400,000,000 shares authorized 97,742,511 and 96,522,867 shares issued and outstanding, respectively 977 965 Additional contributed capital 593,130 587,857 Retained earnings 731,741 721,742 Accumulated other comprehensive loss (16,687) (6,945) Deferred stock compensation (5,196) (401) ---------------------------------- Total stockholders' equity 1,303,965 1,303,218 ---------------------------------- Total liabilities and stockholders' equity $ 1,619,772 $ 1,653,560 ==================================
See accompanying notes to condensed consolidated financial statements. 3 Modis Professional Services, Inc. and Subsidiaries Condensed Consolidated Statements of Income
Three Months Ended Six Months Ended ------------------------------- ------------------------------- June 30, June 30, June 30, June 30, (dollar amounts in thousands except per share amounts) 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) (unaudited) (unaudited) Revenue $ 409,639 $ 464,450 $ 854,049 $ 921,861 Cost of revenue 294,336 328,334 615,031 658,234 ------------- ------------- -------------- ------------- Gross profit 115,303 136,116 239,018 263,627 ------------- ------------- -------------- ------------- Operating expenses: General and administrative 90,915 96,814 185,421 185,623 Depreciation 5,385 4,085 10,753 7,721 Amortization 9,702 8,942 19,301 17,842 ------------- ------------- -------------- ------------- Total operating expenses 106,002 109,841 215,475 211,186 ------------- ------------- -------------- ------------- Income from operations 9,301 26,275 23,543 52,441 Other expense, net 2,207 5,787 5,384 10,436 ------------- ------------- -------------- ------------- Income before provision for income taxes 7,094 20,488 18,159 42,005 Provision for income taxes 3,513 8,093 8,160 16,592 ------------- ------------- -------------- ------------- Net income $ 3,581 $ 12,395 $ 9,999 $ 25,413 ============= ============= ============== ============= Basic net income per common share $ 0.04 $ 0.13 $ 0.10 $ 0.26 ============= ============= ============== ============= Average common shares outstanding, basic 98,018 96,699 97,596 96,627 ============= ============= ============== ============= Diluted net income per common share $ 0.04 $ 0.13 $ 0.10 $ 0.26 ============= ============= ============== ============= Average common shares outstanding, diluted 98,193 97,207 97,776 98,145 ============= ============= ============== =============
See accompanying notes to condensed consolidated financial statements. 4 Modis Professional Services, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
Six months ended June 30, ------------------------------ (dollar amounts in thousands except per share amounts) 2001 2000 - ------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) Cash flows from operating activities: Net income $ 9,999 $ 25,413 Adjustments to net income to net cash provided by by operating activities: Depreciation 10,753 7,721 Amortization 19,301 17,842 Deferred income taxes 8,882 6,648 Deferred compensation 462 - Changes in certain assets and liabilities: Accounts receivable 28,416 (35,806) Prepaid expenses and other assets (2,282) (2,173) Accounts payable and accrued expenses (2,770) 20,077 Accrued payroll and related taxes (1,136) 1,657 Other, net (1,728) 116 --------------- --------------- Net cash provided by operating activities 69,897 41,495 --------------- --------------- Cash flows from investing activities: Purchase of furniture, equipment and leasehold improvements, net of disposals (10,905) (13,784) Purchase of businesses, including additional earn-outs on acquisitions, net of cash acquired (3,807) (110,643) --------------- --------------- Net cash used in investing activities (14,712) (124,427) --------------- --------------- Cash flows from financing activities: Proceeds from stock options exercised 28 4,840 (Repayments) borrowings on indebtedness, net (37,883) 84,171 --------------- --------------- Net cash (used in) provided by financing activities (37,855) 89,011 --------------- --------------- Effect of exchange rate changes on cash and cash equivalents (5,436) 1,782 Net increase in cash and cash equivalents 11,894 7,861 Cash and cash equivalents, beginning of period 5,013 8,526 --------------- --------------- Cash and cash equivalents, end of period $ 16,907 $ 16,387 =============== ===============
See accompanying notes to condensed consolidated financial statements. 5 Modis Professional Services, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) (dollar amounts in thousands except for per share amounts) 1. Basis of Presentation. The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Form 10-K, as filed with the SEC on April 2, 2001. The accompanying condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for an interim period are not necessarily indicative of the results of operations for a full fiscal year. Recent Accounting Pronouncements In July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards ('SFAS') No. 141 'Business Combinations' and No. 142, 'Goodwill and Other Intangible Assets.' SFAS No. 141 and SFAS No. 142 establish accounting and reporting standards for business combinations and for goodwill and intangible assets resulting from business combinations, respectively. SFAS No. 141 prohibits the use of the pooling-of-interests method of accounting for business combinations and applies to all business combinations initiated after June 30, 2001. SFAS No. 142 discontinues the periodic amortization of goodwill and requires impairment to be tested annually. Further, SFAS No. 142 replaces the measurement guidelines for impairment, whereby goodwill not considered impaired under previous accounting literature may be considered impaired under SFAS No. 142. SFAS No. 142 is effective for all fiscal years beginning after December 15, 2001, and cannot be applied retroactively. SFAS No. 142 is to be applied to all recorded goodwill and intangible assets as of the date of adoption. The Company has not yet quantified the impact of adopting SFAS No. 142 in the first quarter of 2002. 2. Comprehensive Income The Company discloses other comprehensive income in accordance with Statement of Financial Accounting Standards ("SFAS") No. 130, 'Reporting Comprehensive Income'. Comprehensive income includes unrealized gains and losses on foreign currency translation adjustments and changes in the fair value of certain derivative financial instruments which qualify for hedge accounting. A summary of comprehensive income for the three and six months ended June 30, 2001 and 2000 is as follows:
Three Months Ended Six Months Ended ------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------------- Net income $ 3,581 $ 12,395 $ 9,999 $ 25,413 Unrealized (loss) gain on foreign currency translation adjustments (a) (679) 440 (8,877) (1,444) Unrealized loss on derivative instruments, net of deferred taxes (245) - (865) - ------------- ------------- -------------- ------------- Total other comprehensive (loss) income (924) 440 (9,742) (1,444) Comprehensive income $ 2,657 $ 12,835 $ 257 $ 23,969 ============= ============= ============== =============
(a) The currency translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. 6 3. Derivative Instruments and Hedging Activities In the first quarter of 2001, the Company adopted SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities'. The adoption of SFAS No. 133 did not have an initial impact on the Company as the Company did not hold any derivatives prior to fiscal 2001. Pursuant to SFAS No. 133, on a date the derivative contract is entered into, the Company designates the derivative as to its type and recognizes the fair value of the derivative on the balance sheet. In fiscal 2001, the Company has engaged in derivatives classified as cash flow hedges, and changes in the fair value of highly effective derivatives are recorded in 'Accumulated other comprehensive loss' on the balance sheet. The Company formally documents all relations between hedging instruments and the hedged items, as well as its risk-management objectives and strategy for undertaking hedging transactions. The Company formally assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. The Company has currently and in the future may enter into interest rate swap agreements in the normal course of business to manage and reduce the risk inherent in interest rate fluctuations. Interest rate swap agreements are considered hedges of specific borrowings and differences received under the swap agreements are recognized as adjustments to interest expense. On February 12, 2001, the Company entered into an interest rate swap agreement to convert certain floating rate debt outstanding under the Company's credit facilities into fixed rate debt by fixing the base rate, as defined by the applicable credit facility. The actual interest rate on the credit facilities is equal to this base rate plus an additional spread, determined by the Company's financial performance. This agreement had an initial balance of $110.4 million as of February 12, 2001, which amortizes to $55.7 million on January 2, 2003 in correlation with the Company's estimate of cash flow needs. On March 2, 2001, the Company entered into an additional interest rate swap agreement to convert an additional $25.0 million into fixed rate debt. The agreements, which were approved by the Board of Directors, had a total notional amount of $136.2 million at June 30, 2001, with underlying rates ranging from 4.85% to 5.185%. Hedging interest rate exposure through the use of swaps are specifically contemplated to manage risk in keeping with management policy. The Company does not utilize derivatives for speculative purposes. These swaps are transaction-specific so that a specific debt instrument determines the amount, maturity and specifics of each swap. 4. Stockholders' Equity In January 2001, the Company adopted the 2001 Voluntary Stock Option Exchange Plan (the 'Option Exchange Plan') in an effort to improve the retention and incentive aspects of the Company's 1995 Plan, and to provide a mechanism to return shares to the 1995 Plan for future issuance. All current employees as of February 12, 2001, who then held options under the Plan or who then held special grants received outside the 1995 Plan since the 1995 Plan was adopted were eligible to participate in the Option Exchange Plan. The Option Exchange Plan allowed eligible option holders to voluntarily cancel existing options in exchange for new options to be issued no earlier than six months and one day following termination of existing options. The exercise price of the new options will be the market price on the date of re-issue. Vested options that are cancelled will be re-granted on a one-for-one basis and will be completely vested upon re-grant. Unvested options that are cancelled will be re-granted on a one-for-two basis and will vest in equal annual installments over a three year period from the date of re-grant. The Option Exchange Plan was approved by the Compensation Committee and the non-employee members of the Board of Directors. The Company expects the Option Exchange Plan to be completed in the third quarter. The Company does not expect to incur any compensation charges in connection with the Option Exchange Plan. For further discussion on the Option Exchange Plan see Form 8-K filed by the Company on January 25, 2001. In January 2001, the Company's Board of Directors issued restricted stock grants of 200,000 shares and 50,000 shares to the Company's President and current Chief Executive Officer and the Company's Chief Financial Officer, respectively. In March 2001, the Company's Board of Directors issued a restricted stock grant of 960,000 shares to the Company's Chairman of the Board, which is scheduled to vest on the fifth anniversary of issuance. The Company recorded $5.26 million in total deferred compensation expense which will be amortized on a straight line basis over the vesting period of the grants. 7 5. Net Income per Common Share The calculation of basic net income per common share and diluted net income per common share is presented below:
Three Months Ended Six Months Ended -------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- Basic income per common share computation: Net income $ 3,581 $ 12,395 $ 9,999 $ 25,413 ============= ============= ============= ============= Average common shares outstanding 98,018 96,699 97,596 96,627 ============= ============= ============= ============= Basic net income per common share $ 0.04 $ 0.13 $ 0.10 $ 0.26 ============= ============= ============= ============= Diluted income per common share computation: Net income $ 3,581 $ 12,395 $ 9,999 $ 25,413 ============= ============= ============= ============= Basic average common shares outstanding 98,018 96,699 97,596 96,627 Incremental shares from assumed exercise of stock options 175 508 180 1,518 ------------- ------------- ------------- ------------ Diluted average common shares outstanding 98,193 97,207 97,776 98,145 ============= ============= ============= ============ Diluted net income per common share $ 0.04 $ 0.13 $ 0.10 $ 0.26 ============== ============= ============= ===========
Options to purchase 3,735,928 and 6,061,122 shares of common stock that were outstanding during the three and six months ended June 30, 2001, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of the common shares. 6. Commitments and Contingencies Litigation The Company is a party to a number of lawsuits and claims arising out of the ordinary conduct of its business. In the opinion of management, based on the advice of in-house and external legal counsel, the lawsuits and claims pending are not likely to have a material adverse effect on the Company, its financial position, its results of operations, or its cash flows. 7. Segment Reporting The Company discloses segment information in accordance with SFAS No. 131, 'Disclosure About Segments of an Enterprise and Related Information,' which requires companies to report selected segment information on a quarterly basis and to report certain entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues. The Company has three reportable segments: professional services, e-Business solutions and information technology (IT) services. The Company's reportable segments are strategic divisions that offer different services and are managed separately as each division requires different resources and marketing strategies. The professional services division provides experienced expertise in a wide variety of disciplines including accounting and finance, law, engineering and technical, science, career management, executive search, and human resource consulting. The e-Business solutions division, operating under the brand Idea Integration, provides e-Business strategy consulting, design and branding, application development, and integration. The IT services division, operating under the brand Modis, offers value-added solutions such as IT project support and staffing, recruitment of full-time positions, project-based solutions, supplier management solutions, and on-site recruiting support. 8 The Company evaluates segment performance based on revenues, gross profit and income before provision for income taxes. The Company does not allocate income taxes or unusual items to the segments. The following table summarizes segment and geographic information:
Three Months Ended Six Months Ended ------------------------------- -------------------------------- June 30, June 30, June 30, June 30, 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- Revenue Professional services $ 158,315 $ 162,732 $ 328,499 $ 323,695 e-Business solutions 48,559 60,554 103,276 113,335 IT services 202,765 241,164 422,274 484,831 ------------ ------------ ------------ ------------ Total revenue $ 409,639 $ 464,450 $ 854,049 $ 921,861 ============ ============ ============ ============ Gross profit Professional services $ 51,912 $ 54,291 $ 108,863 $ 106,951 e-Business solutions 18,735 27,916 36,838 50,720 IT services 44,656 53,909 93,317 105,956 ------------ ------------ ------------ ------------ Total gross profit $ 115,303 $ 136,116 $ 239,018 $ 263,627 ============ ============ ============ ============ Income before provision for income taxes Professional services $ 11,098 $ 15,638 $ 26,176 $ 30,707 e-Business solutions (7,119) 3,312 (14,528) 5,611 IT services 5,322 7,325 11,895 16,123 ------------ ------------ ------------ ------------ 9,301 26,275 23,543 52,441 Corporate interest and other income (2,207) (5,787) (5,384) (10,436) ------------ ------------ ------------ ------------ Total income before provision for income taxes $ 7,094 $ 20,488 $ 18,159 $ 42,005 ============ ============ ============ ============ Geographic Areas Revenues United States $ 303,162 $ 357,620 $ 634,786 $ 698,613 U.K. 103,336 104,003 213,106 217,578 Other 3,141 2,827 6,157 5,670 ------------ ------------ ------------ ------------ Total $ 409,639 $ 464,450 $ 854,049 $ 921,861 ============ ============ ============ ============ June 30, December 31, 2001 2000 - ---------------------------------------------------------------------------------------------- Assets Professional services $ 464,157 $ 454,127 e-Business solutions 327,008 331,732 IT services 813,928 851,992 ------------ ------------ 1,605,093 1,637,851 Corporate 14,679 15,709 ------------ ------------ Total assets $ 1,619,772 $ 1,653,560 ============ ============ Geographic Areas Identifiable Assets United States $ 1,186,512 $ 1,223,932 U.K. 413,020 408,339 Other 20,240 21,289 ------------ ------------ Total $ 1,619,772 $ 1,653,560 ============ ============
9 8. Income Taxes The Company is subject to periodic review by federal, state and local taxing authorities in the ordinary course of business. During the three months ended June 30, 2001, the Company was notified by the Internal Revenue Service that certain prior year income tax returns will be examined. As part of this examination, the tax benefit associated with an investment in a subsidiary that the Company recognized in 2000 will also be reviewed. The impact or adjustment, if any, as a result of this examination cannot be reasonably estimated at this time. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Modis Professional Services, Inc. ('MPS' or the 'Company') is a global provider of human capital solutions including professional staffing, e-Business and systems integration, information technology (IT) resource management, career management consulting, and knowledge worker e-procurement. MPS' solutions enable customers and clients to effectively locate, retain, and deploy strategic knowledge worker resources in the areas of information technology, accounting and finance, law, engineering and technical, and science. MPS consists of three divisions: the professional services division; the e-Business solutions division, operating under the brand Idea Integration; and the information technology services division, operating under the brand Modis. The following detailed analysis of operations should be read in conjunction with the 2000 Consolidated Financial Statements and related notes included in the Company's Form 10-K filed April 2, 2001. THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000 Revenue. Revenue decreased $54.9 million, or 11.8%, to $409.6 million in the three months ended June 30, 2001, from $464.5 million in the year earlier period. The decrease was attributable primarily to a decrease in revenue for Modis which accounted for 49.5% and 51.9% of the Company's total revenue for the three months ended June 30, 2001 and 2000, respectively. Revenue in Modis decreased $38.4 million, or 15.9%, to $202.8 million in the three months ended June 30, 2001, from $241.2 million the year earlier period. This decrease in Modis' revenue was primarily attributable to the diminished demand for information technology services. The Company's customers continue to experience a constrained ability to spend on information technology initiatives due to uncertainties relating to the state of the economy. The Company has experienced a decrease in billable headcount for Modis subsequent to the three months ended June 30, 2001. This decrease will result in a lower level of revenue from Modis if this trend continues. Revenue in Idea Integration decreased $12.0 million, or 19.8%, to $48.6 million in the three months ended June 30, 2001, from $60.6 million in the year earlier period. This decrease in Idea Integration's revenue was primarily attributable to weak demand for e-Business consulting services which is being intensified by the uncertainties relating to the state of the economy. The Company has experienced a decrease in billable headcount for Idea Integration subsequent to the three months ended June 30, 2001. This decrease will result in a lower level of revenue from Idea Integration if this trend continues. Revenue in the professional services division decreased $4.4 million, or 2.7%, to $158.3 million in the three months ended June 30, 2001, from $162.7 million in the year earlier period. This decrease in the professional services division's revenue was primarily attributable to the diminished demand for knowledge worker resources in the services provided by the division. The professional services division operates primarily through five operating units consisting of the accounting and finance, legal, engineering/technical, career management and consulting and scientific units which contributed 40.4%, 12.2%, 34.6%, 9.1% and 3.7%, respectively, of the division's revenue by group during the three months ended June 30, 2001, as compared to 40.5%, 12.6%, 34.5%, 8.3% and 4.1%, respectively, during the year earlier period. The Company has experienced a decrease in billable headcount for the professional services division subsequent to the three months ended June 30, 2001. This decrease will result in a lower level of revenue from the division if this trend continues. Gross Profit. Gross profit decreased $20.8 million or 15.3% to $115.3 million in the three months ended June 30, 2001, from $136.1 million in the year earlier period. Gross margin decreased to 28.1% in the three months ended June 30, 2001, from 29.3% in the year earlier period. The gross margin in Idea Integration decreased to 38.6% in the three months ended June 30, 2001, from 46.1% in the year earlier period. Consultant utilization within Idea Integration decreased as a result of (1) Idea Integration's business model utilizing salaried consultants and (2) the weak demand for e-Business consulting services. The Company addressed consultant utilization within Idea Integration through the downsizing of its consultant base. Additionally, the gross profit generated from Idea Integration, which historically maintains the highest gross margin amongst the three divisions, decreased to 16.2% of the Company's total gross profit for the three months ended June 30, 2001, from 20.5% in the year earlier period. 11 The gross margin in Modis decreased slightly to 22.0% in the three months ended June 30, 2001, from 22.4% in the year earlier period. The decrease in gross margin in Modis is attributable to a lower level of direct hire and permanent placement fees, which generate a higher margin, in the three months ended June 30, 2001 as compared to the year earlier period. As a percentage of revenue, Modis' direct hire and permanent placement fees decreased to 0.5% of revenue in the three months ended June 30, 2001 from 1.2% in the year earlier period. The gross margin in the professional services division decreased to 32.8% in the three months ended June 30, 2001, from 33.4% in the year earlier period. The decrease in gross margin in the professional services division is attributable to a lower level of direct hire and permanent placement fees in the three months ended June 30, 2001 as compared to the year earlier period. As a percentage of revenue, the division's direct hire and permanent placement fees decreased to 6.6% of revenue in the three months ended June 30, 2001 from 8.8% in the year earlier period. Operating expenses. Operating expenses decreased $3.8 million or 3.5% to $106.0 million in the three months ended June 30, 2001, from $109.8 million in the year earlier period. The Company's general and administrative ("G&A") expenses decreased $5.9 million or 6.1% to $90.9 million in the three months ended June 30, 2001, from $96.8 million in the year earlier period. The overall decrease in G&A expenses is attributable to Modis. Modis' G&A expenses decreased $7.9 million, or 20.0%, to $31.6 million in the three months ended June 30, 2001, from $39.5 million in the year earlier period. As a percentage of revenue, Modis' G&A expenses decreased to 15.6% in the three months ended June 30, 2001, from 16.4% in the year earlier period. The decrease in Modis' G&A expenses is associated with the decrease in revenue for the three months ended June 30, 2001, and cost reduction initiatives implemented within Modis in both the first quarter of 2001 and the fourth quarter of 2000. Idea Integration's G&A expenses increased $0.5 million, or 2.2%, to $22.8 million in the three months ended June 30, 2001, from $22.3 million in the year earlier period. As a percentage of revenue, Idea Integration's G&A expenses increased to 47.0% in the three months ended June 30, 2001, from 36.8% in the year earlier period. The increase in Idea Integration's G&A expenses was related primarily to an incremental $7.1 million provision for uncollectible accounts and to a lesser extent severance costs associated with reductions in its workforce in the second quarter of 2001. The professional services division's G&A expenses increased $1.4 million, or 4.0%, to $36.4 million in the three months ended June 30, 2001, from $35.0 million in the year earlier period. As a percentage of revenue, the division's G&A expenses increased to 23.0% in the three months ended June 30, 2001, from 21.5% in the year earlier period. The increase in the professional services division's G&A expenses was related to an increase in the level of spending to establish the corporate infrastructure in the division. During the second quarter of 2001, the Company eliminated many of these duplicative corporate infrastructure responsibilities in the division, integrating these efforts into the MPS corporate structure. Integrating these efforts are expected to lower the level of spending in the professional services division for the remainder of fiscal 2001. Income from operations. Income from operations decreased $17.0 million, or 64.6%, to $9.3 million in the three months ended June 30, 2001, from $26.3 million in the year earlier period. The decrease in operating income is due to the lower contribution of operating income primarily from Idea Integration and to a lesser extent the professional services division and Modis. Income from operations for Idea Integration decreased $10.4 million, to a $7.1 million loss in the three months ended June 30, 2001, from income of $3.3 million in the year earlier period. Income from operations for the professional services division decreased $4.5 million, or 28.8%, to $11.1 million in the three months ended June 30, 2001, from $15.6 million in the year earlier period. Income from operations for Modis decreased $2.0 million, or 27.4 %, to $5.3 million in the three months ended June 30, 2001, from $7.3 million in the year earlier period. For the Company as a whole, income from operations as a percentage of revenue decreased to 2.3% in the three months ended June 30, 2001, from 5.7% in the year earlier period. Other expense, net. Other expense, net consists primarily of interest expense related to borrowings under the Company's credit facilities and notes issued in connection with acquisitions, net of interest income related to investment income from (1) certain investments owned by the Company and (2) cash on hand. Interest expense decreased $3.7 million, or 58.7%, to $2.6 million in the three months ended June 30, 2001, from $6.3 million in the year earlier period. The decrease in interest expense is related to the lower level of borrowings under the Company's credit facilities during the second quarter of 2001. Interest expense was offset by $0.4 million of interest and other income in the three 12 months ended June 30, 2001, as compared to $0.5 million in the year earlier period. Income Taxes. The Company's effective tax rate increased to 49.5% in the three months ended June 30, 2001, as compared to 39.5% in the year earlier period, due to the increased effect of non-deductible expense items on a lower level of income in the three months ended June 30, 2001. Net Income. As a result of the foregoing, net income decreased $8.8 million, or 71.0%, to $3.6 million in the three months ended June 30, 2001, from $12.4 million in the year earlier period. Net income as a percentage of revenue decreased to 0.9% in the three months ended June 30, 2001, from 2.7% in the year earlier period. As a result of the aforementioned revenue trends in each of the Company's divisions, the Company anticipates its net income will be negatively impacted during the remainder of fiscal 2001 as compared to the level of net income produced during the three months ended June 30, 2001. SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000 Revenue. Revenue decreased $67.9 million, or 7.4%, to $854.0 million in the six months ended June 30, 2001, from $921.9 million in the year earlier period. The decrease was attributable primarily to a decrease in revenue for Modis which accounted for 49.4% and 52.6% of the Company's total revenue for the six months ended June 30, 2001 and 2000, respectively. Revenue in Modis decreased $62.5 million, or 12.9%, to $422.3 million in the six months ended June 30, 2001, from $484.8 million the year earlier period. This decrease in Modis' revenue was primarily attributable to the diminished demand for information technology services. The Company's customers continue to experience a constrained ability to spend on information technology initiatives due to uncertainties relating to the state of the economy. The Company has experienced a decrease in billable headcount for Modis subsequent to the six months ended June 30, 2001. This decrease will result in a lower level of revenue from Modis if this trend continues. Revenue in Idea Integration decreased $10.0 million, or 8.8%, to $103.3 million in the six months ended June 30, 2001, from $113.3 million in the year earlier period. This decrease in Idea Integration's revenue was primarily attributable to weak demand for e-Business consulting services which is being intensified by the uncertainties relating to the state of the economy. The Company has experienced a decrease in billable headcount for Idea Integration subsequent to the six months ended June 30, 2001. This decrease will result in a lower level of revenue from Idea Integration if this trend continues. Revenue in the professional services division increased $4.8 million, or 1.5%, to $328.5 million in the six months ended June 30, 2001, from $323.7 million in the year earlier period. The increase in revenue is due to internal growth. The professional services division operates primarily through five operating units consisting of the accounting and finance, legal, engineering/technical, career management and consulting and scientific units which contributed 40.5%, 12.3%, 34.7%, 8.8% and 3.7%, respectively, of the division's revenue by group during the six months ended June 30, 2001, as compared to 40.4%, 12.9%, 33.9%, 8.6% and 4.2%, respectively, during the year earlier period. Contrary to the year-over-year results, the professional services division is experiencing a diminished demand for knowledge worker resources in the services provided by its operating units. Further, the Company has experienced a decrease in billable headcount for the professional services division subsequent to the six months ended June 30, 2001. This decrease will result in a lower level of revenue from the division if this trend continues. Gross Profit. Gross profit decreased $24.6 million or 9.3% to $239.0 million in the six months ended June 30, 2001, from $263.6 million in the year earlier period. Gross margin decreased to 28.0% in the six months ended June 30, 2001, from 28.6% in the year earlier period. This decrease in gross margin was attributable to Idea Integration. The gross margin in Idea Integration decreased to 35.7% in the six months ended June 30, 2001, from 44.8% in the year earlier period. Consultant utilization within Idea Integration decreased as a result of (1) Idea Integration's business model utilizing salaried consultants and (2) the weak demand for e-Business consulting services. The Company addressed consultant utilization within Idea Integration through the downsizing of its consultant base. Additionally, the gross profit generated from Idea Integration, which historically maintains the highest gross margin amongst the three divisions, decreased to 15.4% of the Company's total gross profit for the six months ended June 30, 2001, from 19.2% in the year earlier period. The gross margin in Modis increased to 22.1% in the six months ended June 30, 2001, from 21.9% in the year earlier period. The gross margin in the professional services division increased slightly to 33.1% in the six months ended June 30, 2001, from 33.0% in the year earlier period. 13 Operating expenses. Operating expenses increased $4.3 million or 2.0% to $215.5 million in the six months ended June 30, 2001, from $211.2 million in the year earlier period. The Company's G&A expenses decreased $0.2 million or 0.1% to $185.4 million in the six months ended June 30, 2001, from $185.6 million in the year earlier period. The overall decrease in G&A expenses is attributable to Modis. Modis' G&A expenses decreased $10.1 million, or 13.3%, to $66.0 million in the six months ended June 30, 2001, from $76.1 million in the year earlier period. As a percentage of revenue, Modis' G&A expenses decreased slightly to 15.6% in the six months ended June 30, 2001, from 15.7% in the year earlier period. The decrease in Modis' G&A expenses is associated with the decrease in revenue for the six months ended June 30, 2001, and cost reduction initiatives implemented within Modis in both the first quarter of 2001 and the fourth quarter of 2000. Idea Integration's G&A expenses increased $4.7 million, or 11.5%, to $45.4 million in the six months ended June 30, 2001, from $40.7 million in the year earlier period. As a percentage of revenue, Idea Integration's G&A expenses increased to 44.0% in the six months ended June 30, 2001, from 35.9% in the year earlier period. The increase in Idea Integration's G&A expenses was related primarily to an incremental $9.9 million provision for uncollectible accounts and to a lesser extent severance costs associated with reductions in its workforce in the first six months of 2001. The professional services division's G&A expenses increased $5.1 million, or 7.4%, to $73.9 million in the six months ended June 30, 2001, from $68.8 million in the year earlier period. As a percentage of revenue, the division's G&A expenses increased to 22.5% in the six months ended June 30, 2001, from 21.3% in the year earlier period. The increase in the professional services division's G&A expenses was related to an increase in the level of spending to establish the corporate infrastructure in the division. During the second quarter of 2001, the Company eliminated many of these duplicative corporate infrastructure responsibilities in the division, integrating these efforts into the MPS corporate structure. Integrating these efforts are expected to lower the level of spending in the professional services division for the remainder of fiscal 2001. Income from operations. Income from operations decreased $28.9 million, or 55.2%, to $23.5 million in the six months ended June 30, 2001, from $52.4 million in the year earlier period. The decrease in operating income is due to the lower contribution of operating income primarily from Idea Integration and to a lesser extent the professional services division and Modis. Income from operations for Idea Integration decreased $20.1 million, to a $14.5 million loss in the six months ended June 30, 2001, from income of $5.6 million in the year earlier period. Income from operations for the professional services division decreased $4.5 million, or 14.7%, to $26.2 million in the six months ended June 30, 2001, from $30.7 million in the year earlier period. Income from operations for Modis decreased $4.2 million, or 26.1%, to $11.9 million in the six months ended June 30, 2001, from $16.1 million in the year earlier period. For the Company as a whole, income from operations as a percentage of revenue decreased to 2.8% in the six months ended June 30, 2001, from 5.7% in the year earlier period. Other expense, net. Other expense, net consists primarily of interest expense related to borrowings under the Company's credit facilities and notes issued in connection with acquisitions, net of interest income related to investment income from (1) certain investments owned by the Company and (2) cash on hand. Interest expense decreased $4.9 million, or 43.8%, to $6.3 million in the six months ended June 30, 2001, from $11.2 million in the year earlier period. The decrease in interest expense is related to the lower level of borrowings under the Company's credit facilities during the first six months of 2001. Interest expense was offset by $0.9 million of interest and other income in the six months ended June 30, 2001, as compared to $0.8 million in the year earlier period. Income Taxes. The Company's effective tax rate increased to 44.9% in the six months ended June 30, 2001, as compared to 39.5% in the year earlier period, due to the increased effect of non-deductible expense items on a lower level of income in the six months ended June 30, 2001. Net Income. As a result of the foregoing, net income decreased $15.4 million, or 60.6%, to $10.0 million in the six months ended June 30, 2001, from $25.4 million in the year earlier period. Net income as a percentage of revenue decreased to 1.2% in the six months ended June 30, 2001, from 2.8% in the year earlier period. As a result of the aforementioned revenue trends in each of the Company's divisions, the Company anticipates its net income will be negatively impacted during the remainder of fiscal 2001 as compared to the level of net income produced during the six months ended June 30, 2001. 14 LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements have principally been related to the acquisition of businesses, working capital needs and capital expenditures. These requirements have been met through a combination of bank debt and internally generated funds. The Company's operating cash flows and working capital requirements are affected significantly by the timing of payroll and by the receipt of payment from the customer. Generally, the Company pays its consultants weekly or semi-monthly, and receives payments from customers within 30 to 90 days from the date of invoice. The Company had working capital of $255.0 million and $248.4 million as of June 30, 2001 and December 31, 2000, respectively. The Company had cash and cash equivalents of $16.9 million and $5.0 million as of June 30, 2001 and December 31, 2000, respectively. For the six months ended June 30, 2001 and 2000, the Company generated $69.9 million and $41.5 million of cash flow from operations, respectively. The increase in cash flow from operations in the six months ended June 30, 2001 related to improved receivables collection, decreasing the cash needed to fund accounts receivable. For the six months ended June 30, 2001, the Company used $14.7 million of cash for investing activities, of which $10.9 million were used for capital expenditures and $3.8 million for earn-out payments. For the six months ended June 30, 2000, the Company used $124.4 million of cash for investing activities, of which $110.6 million were used primarily for acquisitions in Idea Integration and to a lesser extent earn-out payments. The Company also used $13.8 million for capital expenditures. For the six months ended June 30, 2001, the Company used $37.9 million of cash for financing activities. This amount primarily represented net repayments on the Company's credit facility and on notes issued in connection with the acquisition of certain companies. These repayments were mainly funded from cash flow from operations. For the six months ended June 30, 2000, the Company generated $89.0 million from financing activities. This amount primarily represented net borrowings from the Company's credit facility, which was used primarily to pay for acquisitions in Idea Integration and to a lesser extent earn-out payments. On November 4, 1999, the Company's Board of Directors authorized the repurchase of up to $65.0 million of the Company's common stock. As of June 30, 2001, no shares have been repurchased under this authorization. The Company anticipates that capital expenditures for furniture and equipment, including improvements to its management information and operating systems during the remainder of fiscal 2001 will be approximately $10.0 million. The Company believes that funds provided by operations, available borrowings under the credit facility, and current amounts of cash will be sufficient to meet its presently anticipated needs for working capital, capital expenditures and acquisitions for at least the next 12 months. 15 Indebtedness of the Company The Company has a $350 million revolving credit facility which is syndicated to a group of 13 banks with Bank of America, as the principal agent. This facility expires on October 27, 2003. In addition, the Company also has a $50 million 364 day credit facility that expires on October 24, 2001. The credit facilities contain certain financial and non-financial covenants relating to the Company's operations, including maintaining certain financial ratios. Repayment of the credit facilities are guaranteed by the material subsidiaries of the Company. In addition, approval is required by the majority of the lenders when the cash consideration of an individual acquisition exceeds 10% of consolidated stockholders' equity of the Company. As of July 31, 2001, the Company had a balance of approximately $156.0 million outstanding under the $350 million credit facility. The Company also had outstanding letters of credit in the amount of $2.0 million, reducing the amount of funds available under the credit facilities to approximately $242.0 million as of July 31, 2001. On February 12, 2001, the Company entered into an interest rate swap agreement to convert certain floating rate debt outstanding under the Company's credit facilities into fixed rate debt by fixing the base rate, as defined by the applicable credit facility. The actual interest rate on the credit facilities is equal to this base rate plus an additional spread, determined by the Company's financial performance. This agreement had an initial balance of $110.4 million as of February 12, 2001, which amortizes to $55.7 million on January 2, 2003 in correlation with the Company's estimate of cash flow needs. On March 2, 2001, the Company entered into an additional interest rate swap agreement to convert an additional $25.0 million into fixed rate debt. The agreements, which were approved by the Board of Directors, had a total notional amount of $136.2 million at June 30, 2001, with underlying rates ranging from 4.85% to 5.185%. The Company has certain notes payable to shareholders of acquired companies which bear interest at rates ranging from 5.0% to 7.0%, the majority of which mature by November 2001. As of July 31, 2001, the Company owed approximately $6.8 million in such acquisition indebtedness. 16 SEASONALITY The Company's quarterly operating results are affected primarily by the number of billing days in the quarter and the seasonality of its customers' businesses. Demand for professional services is typically lower during the first quarter until customers' operating budgets are finalized and the profitability of the Company's consultants is generally lower in the fourth quarter due to fewer billing days because of the higher number of holidays and vacation days. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards ('SFAS') No. 141 'Business Combinations' and No. 142, 'Goodwill and Other Intangible Assets.' SFAS No. 141 and SFAS No. 142 establish accounting and reporting standards for business combinations and for goodwill and intangible assets resulting from business combinations, respectively. SFAS No. 141 prohibits the use of the pooling-of-interests method of accounting for business combinations and applies to all business combinations initiated after June 30, 2001. SFAS No. 142 discontinues the periodic amortization of goodwill and requires impairment to be tested annually. Further, SFAS No. 142 replaces the measurement guidelines for impairment, whereby goodwill not considered impaired under previous accounting literature may be considered impaired under SFAS No. 142. SFAS No. 142 is effective for all fiscal years beginning after December 15, 2001, and cannot be applied retroactively. SFAS No. 142 is to be applied to all recorded goodwill and intangible assets as of the date of adoption. The Company has not yet quantified the impact of adopting SFAS No. 142 in the first quarter of 2002. 17 Item 3. Quantitative And Qualitative Disclosures About Market Risk The following assessment of the Company's market risks does not include uncertainties that are either nonfinancial or nonquantifiable, such as political, economic, tax and credit risks. Interest Rates. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's short-term and long-term debt obligations and to the Company's investments. The Company's investment portfolio consists of cash and cash equivalents including deposits in banks, government securities, money market funds, and short-term investments with maturities, when acquired, of 90 days or less. The Company is adverse to principal loss and seeks to preserve its invested funds by placing these funds with high credit quality issuers. The Company constantly evaluates its invested funds to respond appropriately to a reduction in the credit rating of any investment issuer or guarantor. The Company's short-term and long-term debt obligations totaled $180.8 million as of June 30, 2001 and the Company had $224.0 million available under its credit facilities. The short-term debt obligations include notes payable to former shareholders of acquired corporations, which are at a fixed rate of interest, the majority of which mature by November 2001. The interest rate risk on these notes is immaterial due to the dollar amount of these obligations. On February 12, 2001, the Company entered into an interest rate swap agreement to convert certain floating rate debt outstanding under the Company's credit facilities into fixed rate debt by fixing the base rate, as defined by the applicable credit facility. The actual interest rate on the credit facilities is equal to this base rate plus an additional spread, determined by the Company's financial performance. This agreement had an initial balance of $110.4 million as of February 12, 2001, which amortizes to $55.7 million on January 2, 2003 in correlation with the Company's estimate of cash flow needs. On March 2, 2001, the Company entered into an additional interest rate swap agreement to convert an additional $25.0 million into fixed rate debt. The agreements, which were approved by the Board of Directors, had a total notional amount of $136.2 million at June 30, 2001, with underlying rates ranging from 4.85% to 5.185%. Hedging interest rate exposure through the use of swaps are specifically contemplated to manage risk in keeping with management policy. The Company does not utilize derivatives for speculative purposes. These swaps are transaction-specific so that a specific debt instrument determines the amount, maturity and specifics of each swap. The Company prepared sensitivity analyses of its borrowings under the credit facilities and its financial instruments to determine the impact of hypothetical changes in interest rates on the Company's results of operations, cash flows and the fair value of its financial instruments. The interest-rate analysis assumed a 50 basis point adverse change in interest rates on all borrowings under the credit facilities and financial instruments, representing approximately 10% of the Company's weighted average borrowing rate. However, the interest-rate analysis did not consider the effects of the reduced level of economic activity that could exist in such an environment. A 50 basis point adverse move in interest rates on the Company's outstanding borrowings under the credit facilities would have an immaterial impact on the Company's results of operations and cash flows. However, a 50 basis point adverse move in interest rates would decrease the fair value of the Company's interest rate swap agreements by $0.6 million. Foreign currency exchange rates. Foreign currency exchange rate changes impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. The Company generated approximately 26% of its consolidated revenues for the six months ended June 30, 2001 from international operations, approximately 97% of which were from the United Kingdom. The exchange rate has decreased approximately 5% in the six months ended June 30, 2001, from 1.49 at December 31, 2000 to 1.42 at June 30, 2001. The Company prepared sensitivity analyses to determine the adverse impact of hypothetical changes in the British pound sterling, relative to the U.S. Dollar, on the Company's results of operations and cash flows. However, the analysis did not include the potential impact on sales levels resulting from a change in the British pound sterling. An additional 10% adverse movement in the exchange rate would have had an immaterial impact on the Company's cash flows and financial position for the six months ended June 30, 2001. While fluctuations in the British pound sterling did not historically have a material impact on the Company's results of operations, the lower level of earnings resulting from a decrease in demand for the services provided by the Company's domestic operations have increased the impact of exchange rate fluctuations. However, the Company did not hold or enter into any foreign currency derivative instruments as of June 30, 2001. 18 FACTORS WHICH MAY IMPACT FUTURE RESULTS AND FINANCIAL CONDITION Effect of Fluctuations in the General Economy Demand for the Company's business services is significantly affected by the general level of economic activity in the markets served by the Company. During periods of slowing economic activity, companies may reduce the use of outside consultants and staff augmentation services prior to undertaking layoffs of full-time employees. Also during such periods, companies may elect to defer installation of new IT systems and platforms (such as Enterprise Resource Planning systems) or upgrades to existing systems and platforms. As a result, any significant economic downturn could have a material adverse effect on the Company's results of operations or financial condition. The Company may also be adversely affected by consolidations through mergers and otherwise of major customers or between major customers with non-customers. These consolidations as well as corporate downsizings may result in redundant functions or services and a resulting reduction in demand by such customers for the Company's services. Also, spending for outsourced business services may be put on hold until the consolidations are completed. Competition The Company's industry is intensely competitive and highly fragmented, with few barriers to entry by potential competitors. The Company faces significant competition in the markets that it serves and will face significant competition in any geographic market that it may enter. In each market in which the Company operates, it competes for both clients and qualified professionals with other firms offering similar services. Competition creates an aggressive pricing environment and higher wage costs, which puts pressure on gross margins. Ability to Recruit and Retain Professional Employees The Company depends on its ability to recruit and retain employees who possess the skills, experience and/or professional certifications necessary to meet the requirements of the Company's clients. Competition for individuals possessing the requisite criteria is intense, particularly in certain specialized IT and professional skill areas. The Company often competes with its own clients in attracting and retaining qualified personnel. There can be no assurance that qualified personnel will be available and recruited in sufficient numbers on economic terms acceptable to the Company. Ability to Continue Acquisition Strategy; Ability to Integrate Acquired Operations The Company has experienced significant growth in the past through acquisitions. Although the Company continues to seek acquisition opportunities, there can be no assurance that the Company will be able to negotiate acquisitions on economic terms acceptable to the Company or that the Company will be able to successfully identify acquisition candidates and integrate all acquired operations into the Company. Possible Changes in Governmental Regulations From time to time, legislation is proposed in the United States Congress, state legislative bodies and by foreign governments that would have the effect of requiring employers to provide the same or similar employee benefits to consultants and other temporary personnel as those provided to full-time employees. The enactment of such legislation would eliminate one of the key economic reasons for outsourcing certain human resources and could significantly adversely impact the Company's staff augmentation business. In addition, the Company's costs could increase as a result of future laws or regulations that address insurance, benefits or other employment-related matters. There can be no assurance that the Company could successfully pass any such increased costs to its clients. Financial Covenants The Company's credit facilities require that specified financial ratios be maintained. The Company's ability to meet these financial ratios can be affected by events beyond its control. Failure to meet those financial ratios could allow its lenders to terminate the credit facilities and to declare all amounts outstanding under those facilities to be immediately due and payable. Further, the Company may not be able to obtain replacement credit facilities on terms and conditions or at interest rates as favorable as those in current agreements. 19 Part II. Other Information Item 1. Legal Proceedings No disclosure required. Item 2. Changes in Securities and Use of Proceeds No disclosure required. Item 3. Defaults Upon Senior Securities No disclosure required. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Company's shareholders was held on May 30, 2001. Proxies were solicited from shareholders of record on the close of business on April 4, 2001. On April 4, 2001, there were 96,731,561 shares outstanding and entitled to vote at the Annual Meeting. The shareholder vote on the issues presented at the Annual Meeting was as follows: ELECTION OF DIRECTORS All of the following persons nominated were elected to serve as directors and received the number of votes set opposite their names:
Name For Withhold Authority - ------------------------------------------------------------------------------- Derek E. Dewan 81,908,579 6,735,561 Timothy D. Payne 82,398,134 6,246,006 George A. Bajalia 83,073,891 5,570,249 Peter J. Tanous 82,637,997 6,006,143 T. Wayne Davis 82,615,039 6,029,101 John R. Kennedy 83,126,240 5,517,900 Michael D. Abney 82,093,410 6,550,730 William M. Isaac 83,119,297 5,524,843 George J. Mitchell 80,839,612 7,804,528 Michael L. Huyghue 83,067,847 5,576,293 Effective June 15, 2001, Mr. George A. Bajalia resigned from both his role as an officer of the Company and as a director of the Company. APPROVAL OF 2001 EMPLOYEE STOCK PURCHASE PLAN The 2001 Employee Stock Purchase Plan was approved with the following mix of votes: Name - -------------------------------------------------------- Voting for 87,826,062 Voting against 764,425 Withhold authority 53,653
20 Item 5. Other Information No disclosure required. Item 6. Exhibits and Reports on Form 8-K A. Exhibits 10.1 Modis Professional Services, Inc. 2001 Employee Stock Purchase Plan. 10.2 Modis Professional Services, Inc. Amended and Restated Stock Option Plan. 10.3 Form of Award Notification under the Modis Professional Professional Services, Inc. Senior Executive Annual Incentive Plan. 10.4 Executive Employment Agreement with John L. Marshall III. B. Reports on Form 8-K No disclosure required. 21 SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Timothy D. Payne President, Chief August 8, 2001 Timothy D. Payne Executive Officer and Director /s/ Robert P. Crouch Senior Vice President, Chief August 8, 2001 Robert P. Crouch Financial Officer, Treasurer, and Chief Accounting Officer 22 EX-10 3 ascii2001stockpurch.txt EX. 10.1 2001 EMPLOYEE STOCK PURCHASE PLAN MODIS PROFESSIONAL SERVICES, INC. 2001 EMPLOYEE STOCK PURCHASE PLAN (as amended effective June 28, 2001) The following constitute the provisions of the 2001 Employee Stock Purchase Plan of Modis Professional Services, Inc. 1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The provisions of the Plan shall be construed so as to extend and limit participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423. 2. Definitions. (a) "Account" shall mean the funds accumulated with respect to a Participant as a result of authorized payroll deductions for the purpose of purchasing Common Stock under this Plan. The funds allocated to a Participant's Account shall remain the property of the Participant at all times, but may be commingled with the general funds of the Company. (b) "Administrator" shall mean the Board or any Committee designated by the Board to administer the Plan pursuant to Section 13. (c) "Agent" means the independent agent appointed pursuant to Section 10. (d) "Board" shall mean the Board of Directors of the Company. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. (f) "Committee" means a committee of the Board appointed by the Board in accordance with Section 12 hereof. Any references to the Board in the Plan shall be construed to include the Committee as well. (g) "Common Stock" shall mean the common stock of the Company. (h) "Company" shall mean Modis Professional Services, Inc., a Florida corporation. (i) "Compensation" shall mean the total cash compensation (before taxes) received by an Employee during an Offering Period from salary or wages. Salary and wages shall include, but not be limited to, overtime pay, bonuses, holiday pay, vacation pay, and short-term disability payments. Salary reduction contributions made by the Employee under any plan maintained by the Company or a Subsidiary pursuant to Code Section 125 or 401(k) shall also be included in Compensation. Compensation shall not include payments under any other form of equity or fringe benefit program, or compensation attributable to the vesting of any restricted stock or exercise of a stock option. (j) "Designated Subsidiary" shall mean any Subsidiary selected by the Administrator as eligible to participate in the Plan. (k) "Effective Date" shall mean June 1, 2001. (l) "Eligible Employee" shall mean any individual who is a common law employee of the Company or any Designated Subsidiary whose customary employment with the Company or Designated Subsidiary is at least twenty (20) hours per week and more than five (5) months in any calendar year and who meets the requirements of Section 3. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave. (m) "Fair Market Value" shall mean, as of any Trading Day, the closing sales price for such Common Stock (or the closing bid, if no sales were reported) as quoted on the New York Stock Exchange or any other established stock exchange or national market system, including without limitation the Nasdaq National Market, as reported in The Wall Street Journal or such other source as the Board deems reliable. (n) "Offering Date" shall mean the first Trading Day of each Offering Period. (o) "Offering Period" shall mean a three-month, six-month or other period as determined by the Board or Committee; provided, however, that in no event shall the Offering Period extend for a period of longer than 27 months. The first Offering Period shall commence on the Plan's first Offering Date, which shall be as soon as administratively practicable after the Effective Date, and end on the Purchase Date. (p) "Option" means a right granted under this Plan to an Eligible Employee to purchase shares of Common Stock of the Company. (q) "Participant" means an Eligible Employee who enrolls in the Plan pursuant to Section 4. (r) "Plan" shall mean the 2001 Employee Stock Purchase Plan. (s) "Purchase Date" means the last Trading Day of each Offering Period. (t) "Purchase Price" shall mean 85% of the Fair Market Value of a share of Common Stock, or fractional portion thereof (as the case may be), on the Offering Date or on the Purchase Date, whichever is lower; provided however, that the Purchase Price may be adjusted by the Board or Committee pursuant to Section 16. (u) "Subsidiary" shall mean any subsidiary corporation (other than the Company) in an unbroken chain or corporations beginning with the Company, as described in Code Section 424(f). (v) "Trading Day" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading. 3. Eligibility. Any Eligible Employee of the Company or a Designated Subsidiary who has completed six (6) months with the Company prior to an Offering Date is eligible to participate in the Plan. Notwithstanding the foregoing, no otherwise Eligible Employee may become a Participant for an Offering Period to the extent that, immediately following the grant of the Option, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. Enrollment. An Eligible Employee who meets the requirements of Section 3 may become a Participant by enrolling in the Plan on a date prescribed by the Board or Committee prior to an applicable Offering Date, a completed payroll deduction authorization and Plan enrollment form. 5. Participation. (a) On the Offering Date, Participants shall be granted an Option for as many shares of Common Stock as the Participant will be able to purchase with the payroll deductions credited to his or her account during that Offering Period; provided, however, that the maximum number of shares of Common Stock that a Participant may purchase during any Offering Period shall in no event exceed 3,000 shares. Subject to Section 3 hereof, an Eligible Employee may authorize payroll deductions at the rate of any whole percentage or in a specified amount of the Eligible Employee's Compensation; in either case, not to exceed 10% of such Compensation. All payroll deductions may be held by the Company and commingled with other corporate funds. No interest shall be paid or credited to the Participant with respect to such payroll deductions. (b) To the extent necessary to comply with Code Section 423(b)(8) and Section 3 hereof, a Participant's payroll deductions may be decreased to zero percent (0%) at any time during an Offering Period. (c) At the termination of each Offering Period, the Company shall automatically re-enroll the Participant in the next Offering Period, and the balance in the Participant's Account shall be used for Option exercises in the next Offering Period, unless the Participant has advised the Company otherwise. (d) Subject to the Committee's absolute right to prohibit such increases or decreases, a Participant may increase or decrease his or her payroll deduction by filing a new payroll deduction authorization at any time during an Offering Period. 6. Exercise of Option. (a) Each Employee who is a Participant on the Purchase Date of an Offering Period shall be deemed to have exercised his or her Option on such date and shall be deemed to have purchased from the Company the maximum number of full shares at the applicable Purchase Price which may be purchased with the accumulated payroll deductions in his or her Account. The Committee may determine from time to time whether fractional shares may be purchased. If the purchase of fractional shares is not permitted, any payroll deductions accumulated in a Participant's Account which are not sufficient to purchase a full share shall be retained in the Account for the subsequent Offering Period, subject to earlier withdrawal by the Participant. Any other funds left over in a Participant's Account after the Purchase Date shall be returned to the Participant. (b) At the time the Option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the Participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the Option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the Participant's Compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Participant. (c) If the Board or Committee determines that, on a given Purchase Date, the number of shares with respect to which Options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Offering Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such Purchase Date, the Board or Committee may in its sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchase on such Offering Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising Options to purchase Common Stock on such Purchase Date, and continue all Offering Periods then in effect, or (y) provide that the Company shall make a pro rata allocation of the shares available for purchase on such Offering Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising Options to purchase Common Stock on such Purchase Date, and terminate any or all Offering Periods then in effect pursuant to Section 17 hereof. The Company may make pro rata allocation of the shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company's stockholders subsequent to such Offering Date. 7. Withdrawal/Termination of Participation. (a) A Participant may withdraw from an Offering, in whole but not in part, at any time prior to the Purchase Date of the Offering Period by delivering to the Company a notice of withdrawal, in which event the Company will refund the entire balance of the Participant's Account to Participant as soon as reasonably practicable thereafter. (b) A Participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the Participant withdraws. 8. Shares Reserved for Plan. Subject to adjustment upon changes in capitalization of the Company as provided in Section 16 hereof, there shall be reserved for issuance and purchase by Participants under the Plan an aggregate of 1,000,000 shares of Common Stock. Shares subject to the Plan shall be authorized but unissued shares, or treasury shares, at the discretion of the Board. Shares needed to satisfy the needs of the Plan may be newly issued by the Company or acquired by purchases at the expense of the Company on the open market or in private transactions. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Options will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Option that is terminated unexercised will automatically again become available for issuance under the Plan. 9. Evidence of Stock Ownership. Subject to the terms and conditions of the Plan, promptly following the end of each Offering Period, each Participant shall become the beneficial owner of all shares of Common Stock and any fractional interest in shares purchased on his or her behalf, and the Committee shall establish a book entry account in the name of the Participant to reflect the share(s) of Common Stock so purchased. The Committee may determine, in its sole discretion, the manner of delivery of shares of Common Stock purchased under the Plan, which may be by electronic account entry into new or existing brokerage or other accounts, delivery of physical stock certificates or such other means as the Committee deems appropriate, including, without limitation, registering shares in street name by an Agent selected by the Committee. Notwithstanding anything contained herein to the contrary, a Participant may request at any time to receive certificates for any or all of his or her shares then being held by an Agent. In addition, if shares are held by an Agent, within the thirty (30) day period following the Participant's termination of employment with the Company or with a Designated Subsidiary, as applicable, the Committee may direct the Agent to deliver certificates evidencing share ownership to the Participant in the name of the Participant or, if elected by the Participant on his or her enrollment form, in the name of the Participant and his or her spouse. 10. Appointment of Agent. The Committee may appoint an independent bank, trust company, brokerage firm, or other financial institution to administer the Plan (including but not limited to the establishment of such procedures as reasonably may be necessary to accomplish such administration in a manner consistent with the purposes of the Plan), keep the records of the Plan reflecting the interests of Participants, hold shares of Common Stock acquired under the Plan on behalf of Participants, and generally act as the agent of Participants in the manner and to the extent provided in the Plan. 11. Termination of Employment. Upon termination of employment or loss of eligibility to participate in the Plan for any reason whatsoever, including but not limited to death or retirement, the balance in the Account of a Participant shall be paid to the Participant or his or her estate. 12. Rights as Shareholder. No Participant shall have any right as a shareholder with respect to any shares of Common Stock until the shares have been purchased and the Participant becomes the holder of record of shares of Common Stock pursuant to Section 9 of the Plan. Except as otherwise provided under the Plan, no adjustment will be made for dividends or distributions with respect to Options as to which there is a record date preceding the date the Participant becomes the beneficial owner of such shares, except as the Board may determine in its sole discretion. 13. Administration. The Board shall appoint a Committee consisting of at least two members who will service for such period of time as the Board may specify and who may be removed by the Board at any time. The Committee shall be vested with full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made at a meeting of the Committee duly held. Every finding, decision and determination made by either the Board or Committee shall, to the full extent permitted by law, be final and binding upon all parties. No Board or Committee member shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted thereunder. As permitted by law, the Committee may delegate its authorities as identified hereunder. 14. Transferability. Neither payroll deductions credited to a Participant's Account nor any rights with regard to the exercise of an Option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 7 hereof. 15. Reports. Statements of each Participant's Account shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any. 16. Changes in Capitalization. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, offerings of rights, or any other change in the structure of the common shares of the Company, the Board may make such adjustment, if any, as it may deem appropriate in the number, kind, and the price of shares available for purchase under the Plan, and in the number of shares which a Participant is entitled to purchase. 17. Amendment or Termination. (a) The Administrator may at any time and for any reason terminate or amend the Plan. Except as otherwise provided in the Plan, no such termination can affect Options previously granted, provided that an Offering Period may be terminated by the Administrator on any Purchase Date if the Administrator determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 16 and this Section 17 hereof, no amendment may make any change in any Option theretofore granted which adversely affects the rights of any Participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required. (b) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to: (i) increasing the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (ii) shortening any Offering Period so that Offering Period ends on a new Purchase Date, including an Offering Period underway at the time of the Board action; and (iii) allocating shares. Such modifications or amendments shall not require stockholder approval or the consent of any Plan Participants. 18. Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 19. Conditions Upon Issuance of Shares. (a) Shares shall not be issued with respect to an Option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) As a condition to the exercise of an option, the Company may require the Participant exercising such Option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 20. Designation of Beneficiary. A Participant may file with the Company a written designation of a beneficiary who is to receive shares of Common Stock and cash, if any, under the Plan in the event of such Participant's death prior to delivery of such shares or cash to such Participant. In the event of the death of a Participant who has not filed a designation of beneficiary with the Company, (a) the Company will deliver such shares of Common Stock and cash to the executor or administrator of the estate of the Participant, or (b) if to the Company's knowledge no such executor or administrator has been appointed, the Company, in its sole discretion, may deliver such shares of Common Stock and cash to the spouse or to any one or more dependents or relatives of the Participant or, if no spouse, dependent or relative is known to the Company, to such other person as the Company may designate. 21. No Employment Rights. The Plan does not, directly or indirectly, create any right for the benefit of any Employee or class of Employees to purchase any shares under the Plan, or create in any Employee or class of Employees any right with respect to continuation of employment by the Company or any of its Subsidiaries, and it shall not be deemed to interfere in any way with the Company or Subsidiary's right to terminate, or otherwise modify, an Employee's employment at any time. 22. Governing Law. The Plan shall be construed and administered in accordance with the laws of the State of Florida. 23. Successors and Assigns. The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company. 24. Term of Plan. The Plan shall become effective on the date determined by the Board, subject to approval by the Company's shareholders. It shall continue in effect until the earliest to occur of: (a) the date the Plan is terminated pursuant to Section 17, or (b) ten years from the effective date of the Plan. EX-10 4 asciistockoptionplan.txt EX. 10.2 AMENDED AND RESTATED STOCK OPTION PLAN MODIS PROFESSIONAL SERVICES, INC. AMENDED AND RESTATED 1995 STOCK OPTION PLAN ARTICLE I DEFINITIONS As used herein, the following terms have the following meanings unless the context clearly indicates to the contrary: "Award" shall mean a grant of Restricted Stock. "Board" shall mean the Board of Directors of the Company. "Cause" shall mean theft or destruction of property of the Company, a Parent, or a Subsidiary, disregard of Company rules or policies, or conduct evincing willful or wanton disregard of the interests of the Company. Such determination shall be made by the Committee based on information presented by the Company and the Employee and shall be final and binding on all parties hereto. "Change in Control" shall mean the occurrence of either of the following events: (i) A change in the composition of the Board of Directors as a result of which fewer than one-half of the incumbent directors are directors who either: (A) Had been directors of the Company 24 months prior to such change; or (B) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the directors who had been directors of the Company 24 months prior to such change and who were still in office at the time of the election or nomination; or (ii) Any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act), other than any person who is a shareholder of the Company on or before the effective date of the Plan, by the acquisition or aggregation of Securities is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the "Base Capital Stock"); except that any change in the relative beneficial ownership of the Company's securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person's ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person's beneficial ownership of any securities of the Company. "Code" shall mean the United States Internal Revenue Code of 1986, including effective date and transition rules (whether or not codified). Any reference herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of future law. "Committee" shall mean a committee of at least two directors appointed from time to time by the Board, having the duties and authority set forth herein in addition to any other authority granted by the Board; provided, however, that with respect to any Options or Awards granted to an individual who is also a Section 16 Insider, the Committee shall consist of at least two Directors (who need not be members of the Committee with respect to Options or Awards granted to any other individuals) who are both Non-employee Directors within the meaning of Rule 16b-3 of the Exchange Act and Outside Directors within the meaning of Code Section 162(m), and all authority and discretion shall be exercised by such Directors, and references herein to the "Committee" shall mean such Directors insofar as any actions or determination of the Committee shall relate to or affect Options or Awards made to or held by any Section 16 Insider. At any time that the Board shall not have appointed a committee as described above, any reference herein to the Committee shall mean a reference to the Board. "Company" shall mean Modis Professional Services, Inc. "Director" shall mean a member of the Board and any person who is an advisory or honorary director of the Company if such person is considered a director for the purposes of Section 16 of the Exchange Act, as determined by reference to such Section 16 and to the rules, regulations, judicial decisions, and interpretative or "no-action" positions with respect thereto of the Securities and Exchange Commission, as the same may be in effect or set forth from time to time. "Employee" shall mean an employee of the Employer. "Employer" shall mean the corporation that employs a Grantee. "Exchange Act" shall mean the Securities Exchange Act of 1934. Any reference herein to a specific section of the Exchange Act shall be deemed to include a reference to any corresponding provision of future law. "Exercise Price" shall mean the price at which an Optionee may purchase a share of Stock under a Stock Option Agreement. "Fair Market Value" on any date shall mean (i) the closing sales price of the Stock, regular way, on such date on the national securities exchange having the greatest volume of trading in the Stock during the thirty-day period preceding the day the value is to be determined or, if such exchange was not open for trading on such date, the next preceding date on which it was open; (ii) if the Stock is not traded on any national securities exchange, the average of the closing high bid and low asked prices of the Stock on the over-the counter market on the day such value is to be determined, or in the absence of closing bids on such day, the closing bids on the next preceding day on which there were bids; or (iii) if the Stock also is not traded on the over-the-counter market, the fair market value as determined in good faith by the Board or the Committee based on such relevant facts as may be available to the Board, which may include opinions of independent experts, the price at which recent sales have been made, the book value of the Stock, and the Company's current and future earnings. "Grantee" shall mean a person who is an Optionee or a person who has received an Award of Restricted Stock. "Incentive Stock Option" shall mean an option to purchase any stock of the Company, which complies with and is subject to the terms, limitations and conditions of Section 422 of the Code and any regulations promulgated with respect thereto. "Officer" shall mean a person who constitutes an officer of the Company for the purposes of Section 16 of the Exchange Act, as determined by reference to such Section 16 and to the rules, regulations, judicial decisions, and interpretative or "no-action" positions with respect thereto of the Securities and Exchange Commission, as the same may be in effect or set forth from time to time. "Option" shall mean an option, whether or not an Incentive Stock Option, to purchase Stock granted pursuant to the provisions of Article VI hereof. "Optionee" shall mean a person to whom an Option has been granted hereunder. "Parent" shall mean any corporation (other than the Employer) in an unbroken chain of corporations ending with the Employer if, at the time of the grant (or modification) of the Option, each of the corporations other than the Employer owns stock possessing 50 percent or more of the total combined voting power of the classes of stock in one of the other corporations in such chain. "Permanent and Total Disability" shall have the same mean as given to that term by Code Section 22(e)(3) and any regulations or rulings promulgated thereunder. "Plan" shall mean the Modis Professional Services, Inc. Amended and Restated 1995 Stock Option Plan, the terms of which are set forth herein. "Purchasable" shall refer to Stock which may be purchased by an Optionee under the terms of this Plan on or after a certain date specified in the applicable Stock Option Agreement. "Qualified Domestic Relations Order" shall have the meaning set forth in the Code or in the Employee Retirement Income Security Act of 1974, or the rules and regulations promulgated under the Code or such Act. "Reload Option" shall have the meaning set forth in Section 6.8 hereof. "Restricted Stock" shall mean Stock issued, subject to restrictions, to a Grantee pursuant to Article VII hereof. "Restriction Agreement" shall mean the agreement setting forth the terms of an Award, and executed by a Grantee as provided in Section 7.1 hereof. "Section 16 Insider" shall mean any person who is subject to the provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2 promulgated pursuant to the Exchange Act. "Stock" shall mean the Common Stock, par value $.01 per share, of the Company or, in the event that the Outstanding shares of Stock are hereafter changed into or exchanged for shares of a different stock or securities of the Company or some other entity, such other stock or securities. "Stock Option Agreement" shall mean an agreement between the Company and an Optionee under which the Optionee may purchase Stock hereunder, a sample form of which is attached hereto as Exhibit A (which form may be varied by the Committee in granting an Option). "Subsidiary" shall mean any corporation (other than the Employer) in an unbroken chain of corporations beginning with the Employer if, at the time of the grant (or modification) of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. ARTICLE II THE PLAN 2.1 Name This Plan shall be known as the Modis Professional Services, Inc. Amended and Restated 1995 Stock Option Plan. 2.2 Purpose. The purpose of the Plan is to advance the interests of the Company, its Subsidiaries and its shareholders by affording certain employees (including employees who are also Directors) of the Company and its Subsidiaries an opportunity to acquire or increase their proprietary interests in the Company. The objective of the issuance of the Options and Awards is to promote the growth and profitability of the Company and its Subsidiaries because the Grantees will be provided with an additional incentive to achieve the Company's objectives through participation in its success and growth and by encouraging their continued association with or service to the Company. 2.3 Effective Date. The Plan shall become effective on August 24, 1995; provided, however, that the Plan shall terminate, and all Options or Awards theretofore granted or awarded shall become void and may not be exercised, on August 24, 1996, if the shareholders of the Company shall not by that date have approved the Plan's adoption. ARTICLE III PARTICIPANTS The class of persons eligible to participate in the Plan shall consist of all persons whose participation in the Plan the Committee determines to be in the best interests of the Company which shall include all employees (including employees who are also Directors), including but not limited to, executive personnel of the Company or any Subsidiary. ARTICLE IV ADMINISTRATION 4.1 Duties and Powers of the Committee. The Plan shall be administered by the Committee. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it may deem necessary. The Committee shall have the power to act by unanimous written consent in lieu of a meeting, and to meet telephonically. In administering the Plan, the Committee's actions and determinations shall be binding on all interested parties. The Committee shall have the power to grant Options or Awards in accordance with the provisions of the Plan and may grant Options and Awards singly, in combination, or in tandem. Subject to the provisions of the Plan, the Committee shall have the discretion and authority to determine those individuals to whom Options or Awards will be granted and whether such Options shall be accompanied by the right to receive Reload Options, the number of shares of Stock subject to each Option or Award, such other matters as are specified herein, and any other terms and conditions of a Stock Option Agreement or Restriction Agreement. The Committee shall also have the discretion and authority to delegate to any Officer its powers to grant Options or Awards under the Plan to any person who is an employee of the Company but not an Officer or Director. To the extent not inconsistent with the provisions of the Plan, the Committee may give a Grantee an election to surrender an Option or Award in exchange for the grant of a new Option or Award, and shall have the authority to amend or modify an outstanding Stock Option Agreement or Restriction Agreement, or to waive any provision thereof, provided that the Grantee consents to such action. 4.2 Interpretation; Rules. Subject to the express provisions of the Plan, the Committee also shall have complete authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the details and provisions of each Stock Option Agreement, and to make all other determinations necessary or advisable for the administration of the Plan, including, without limitation, the amending or altering of the Plan and any Options or Awards granted hereunder as may be required to comply with or to conform to any federal, state, or local laws or regulations. 4.3 No Liability. Neither any member of the Board nor any member of the Committee shall be liable to any person for any act or determination made in good faith with respect to the Plan or any Option or Award granted hereunder. 4.4 Majority Rule. A majority of the members of the Committee shall constitute a quorum, and any action taken by a majority at a meeting at which a quorum is present, or any action taken without a meeting evidenced by a writing executed by all the members of the Committee, shall constitute the action of the Committee. 4.5 Company Assistance. The Company shall supply full and timely information to the Committee on all matters relating to eligible persons, their employment, death, retirement, disability, or other termination of employment, and such other pertinent facts as the Committee may require. The Company shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. ARTICLE V SHARES OF STOCK SUBJECT TO PLAN 5.1 Limitations. Subject to any anti-dilution adjustment pursuant to the provisions of Section 5.2 hereof, for the Company's 1998 fiscal year, the maximum number of shares of stock that may be issued hereunder shall be 20,000,000. Notwithstanding the foregoing, the aggregate number of shares of Stock that may be issued upon exercise of Incentive Stock Options shall not exceed 20,000,000 Shares (subject to any anti-dilution adjustment pursuant to the provisions of Section 5.2 hereof). Any or all shares of Stock subject to the Plan may be issued in any combination of Incentive Stock Options, Non-Incentive Stock Options or Restricted Stock. Shares subject to an Option issued as an Award may be either authorized and unissued shares or shares issued and later acquired by the Company. The shares covered by any unexercised portion of an Option that is terminated for any reason (except as set forth in the following paragraph), or any forfeited portion of an Award, may then be optioned or awarded under the Plan, and such shares shall not be considered as having been optioned or issued in computing the number of shares of Stock remaining available for option or award hereunder. If Options are issued in respect of options to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any Subsidiary of the Company), to the extent that such issuance shall not be inconsistent with the terms, limitations and conditions of Code section 422 or Rule 16b-3 under the Exchange Act, the aggregate number of shares of Stock for which Options may be granted hereunder shall automatically be increased by the number of shares subject to the Options so issued; provided, however, that the aggregate number of shares of Stock for which Options may be granted hereunder shall automatically be decreased by the number of shares covered by any unexercised portion of an Option so issued that has terminated for any reason, and the shares subject to any such unexercised portion may not be optioned to any other person. 5.2 Anti-dilution. (a) If the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, reorganization, recapitalization, reclassification, combination or exchange of shares, stock split or stock dividend, if any spin-off, spin-out or other distribution of assets materially affects the price of the Company's stock, or if any assumption and conversion to the Plan by the Company of an acquired company's outstanding option grants then: (i) the aggregate number and kind of shares of Stock for which Options or Awards may be granted hereunder shall be adjusted proportionately by the Committee; and (ii) the rights of Optionees (concerning the number of shares subject to Options and the Exercise Price) under outstanding Options and the rights of the holders of Awards (concerning the terms and conditions of the lapse of any then-remaining restrictions), shall be adjusted proportionately by the Committee. (b) If the Company shall be a party to any reorganization in which it does not survive, involving merger, consolidation, or acquisition of the stock or substantially all the assets of the Company, the Committee, in its discretion, may: (i) notwithstanding other provisions hereof, declare that all Options granted under the Plan shall become exercisable immediately notwithstanding the provisions of the respective Stock Option Agreements regarding exercisability, that all such Options shall terminate 30 days after the Committee gives written notice of the immediate right to exercise all such options and of the decision to terminate all Options not exercised within such 30 day period, and that all then-remaining restrictions pertaining to Awards under the Plan shall immediately lapse; and/or (ii) notify all Grantees that all Options or Awards granted under the Plan shall be assumed by the successor corporation or substituted on an equitable basis with options or restricted stock issued by such successor corporation. (c) If the Company is to be liquidated or dissolved in connection with a reorganization described in Section 5.2(b), the provisions of such Section shall apply. In all other instances, the adoption of a plan of dissolution or liquidation of the Company shall, notwithstanding other provisions hereof, cause all then-remaining restrictions pertaining to Awards under the Plan to lapse, and shall cause every Option outstanding under the Plan to terminate to the extent not exercised prior to the adoption of the plan of dissolution or liquidation by the shareholders, provided that, notwithstanding other provisions hereof, the Committee may declare all Options granted under the Plan to be exercisable at any time on or before the fifth business day following such adoption notwithstanding the provisions of the respective Stock Option Agreements regarding exercisability. (d) The adjustments described in paragraphs (a) through (c) of this Section 5.2, and the manner of their application, shall be determined solely by the Committee, and any such adjustment may provide for the elimination of fractional share interests; provided, however, that any adjustment made by the Board or the Committee shall be made in a manner that will not cause an Incentive Stock Option to be other than an Incentive Stock Option under applicable statutory and regulatory provisions. The adjustments required under this Article V shall apply to any successors of the Company and shall be made regardless of the number or type of successive events requiring such adjustments. 5.3 Per-Employee Limitation. Subject to any antidilution adjustment pursuant to the provisions of Section 5.2 hereof, the maximum number of shares of Stock in any combination of Incentive Stock Options, non-Incentive Stock Options, Restricted Stock that may be issued hereunder to any one Employee in any given fiscal year shall be 2,000,000 in fiscal years 1995 and 1996 and 500,000 in all fiscal years thereafter; provided, however, that the Committee may authorize the issuance of more than the foregoing maximum number of shares of Stock in any combination of Incentive Stock Option, non-Incentive Stock Options, and Restricted Stock if the Committee specifies that such issuance in excess of such maximum is not intended to comply with the performance-based compensation provisions contained in Section 162(m)(4)(C) of the Code. ARTICLE VI OPTIONS 6.1 Types of Options Granted. The Committee may, under this Plan, grant either Incentive Stock Options or Options which do not qualify as Incentive Stock Options. Within the limitations provided in this Plan, both types of Options may be granted to the same person at the same time, or at different times, under different terms and conditions, as long as the terms and conditions of each Option are consistent with the provisions of the Plan. Without limitation of the foregoing, Options may be granted subject to conditions based on the financial performance of the Company or any other factor the Committee deems relevant. 6.2 Option Grant and Agreement. Each Option granted hereunder shall be evidenced by a written Stock Option Agreement executed by the Company and the Optionee. The terms of the Option, including the Option's duration, time or times of exercise, exercise price, whether the Option is intended to be an Incentive Stock Option, and whether the Option is to be accompanied by the right to receive a Reload Option, shall be stated in the Stock Option Agreement. No Incentive Stock Option may be granted more than ten years after the earlier to occur of the effective date of the Plan or the date the Plan is approved by the Company's shareholders. Separate Stock Option Agreements may be used for Options intended to be Incentive Stock Options and those not so intended, but any failure to use such separate agreements shall not invalidate, or otherwise adversely affect the Optionee's interest in, the Options evidenced thereby. 6.3 Optionee Limitations. The Committee shall not grant an Incentive Stock Option to any person who, at the time the Incentive Stock Option is granted: (a) is not an employee of the Company or any of its Subsidiaries; or (b) owns or is considered to own stock possessing at least 10% of the total combined voting power of all classes of stock of the Company or any of its Parent or Subsidiary corporations; provided, however, that this limitation shall not apply if at the time an Incentive Stock Option is granted the Exercise Price is at least 110% of the Fair Market Value of the Stock subject to such Option and such Option by its terms would not be exercisable after five years from the date on which the Option is granted. For the purpose of this subsection (b), a person shall be considered to own: (i) the stock owned, directly or indirectly, by or for his or her brothers and sisters (whether by whole or half blood), spouse, ancestors and lineal descendants; (ii) the stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust in proportion to such person's stock interest, partnership interest or beneficial interest therein; and (iii) the stock which such person may purchase under any outstanding options of the Employer or of any Parent or Subsidiary of the Employer. 6.4 $100,000 Limitation. Except as provided below, the Committee shall not grant an Incentive Stock Option to, or modify the exercise provisions of outstanding Incentive Stock Options held by, any person who, at the time the Incentive Stock Option is granted (or modified), would thereby receive or hold any Incentive Stock Options of the Employer and any Parent or Subsidiary of the Employer, such that the aggregate Fair Market Value (determined as of the respective dates of grant or modification of each option) of the stock with respect to which such Incentive Stock Options are exercisable for the first time during any calendar year is in excess of $100,000 (or such other limit as may be prescribed by the Code from time to time); provided that the foregoing restriction on modification of outstanding Incentive Stock Options shall not preclude the Committee from modifying an outstanding Incentive Stock Option if, as a result of such modification and with the consent of the Optionee, such Option no longer constitutes an Incentive Stock Option; and provided that, if the $100,000 limitation (or such other limitation prescribed by the Code) described in this Section 6.4 is exceeded, the Incentive Stock Option, the granting or modification of which resulted in the exceeding of such limit, shall be treated as an Incentive Stock Option up to the limitation and the excess shall be treated as an Option not qualifying as an Incentive Stock Option. 6.5 Exercise Price. The exercise Price of the Stock subject to each Option shall be determined by the Committee. Subject to the provisions of Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall not be less than 100% of the Fair Market Value of the Stock as of the date the Option is granted (or in the case of an Incentive Stock Option that is subsequently modified, on the date of such modification). The Exercise Price of a non Incentive Stock Option shall not be less than 100% of the Fair Market Value of the Stock on the date the Option is granted. 6.6 Exercise Period. The period for the exercise of each Option granted hereunder shall be determined by the Committee, but the Stock Option Agreement with respect to each Option intended to be an Incentive Stock Option shall provide that such Option shall not be exercisable after the expiration of ten years from the date of grant (or modification) of the Option. In addition, no Option granted to a Section 16 Insider shall be exercisable prior to the expiration of six months from the date such Option is granted, other than in the case of the death or disability of the Optionee, and no Option shall be exercisable prior to shareholder approval of the Plan. 6.7 Option Exercise. (a) Unless otherwise provided in the Stock Option Agreement or Section 6.6 hereof, an Option may be exercised at any time or from time to time during the term of the Option as to any or all full shares which have become Purchasable under the provisions of the Option, but not at any time as to less than 100 shares unless the remaining shares that have become so Purchasable are less than 100 shares. The Committee shall have the authority to prescribe in any Stock Option Agreement that the Option may be exercised only in accordance with a vesting schedule during the term of the Option. (b) An Option shall be exercised by (i) delivery to the Company at its principal office a written notice of exercise with respect to a specified number of shares of Stock and (ii) payment to the Company at that office of the full amount of the Exercise Price for such number of shares in accordance with Section 6.7(c). If requested by an Optionee, an Option may be exercised with the involvement of a stockbroker in accordance with the federal margin rules set forth in Regulation T (in which case the certificates representing the underlying shares will be delivered by the Company directly to the stockbroker). (c) The Exercise Price is to be paid in full in cash upon the exercise of the Option and the Company shall not be required to deliver certificates for the shares purchased under such payment has been made; provided, however, that in lieu of cash, all or any portion of the Exercise Price may be paid by tendering to the Company shares of Stock duly endorsed for transfer and owned by the Optionee, or by authorization to the Company to withhold shares of Stock otherwise issuable upon exercise of the Option, in each case to be credited against the Exercise Price at the Fair Market Value of such shares on the date of exercise (however, no fractional shares may be so transferred, and the Company shall not be obligated to make any cash payments in consideration of any excess of the aggregate Fair Market Value of shares transferred over the aggregate Exercise Price); provided further, that the Board may provide in a Stock Option Agreement (or may otherwise determine in its sole discretion at the time of exercise) that, in lieu of cash or shares, all or a portion of the Exercise Price may be paid by the Optionee's execution of a recourse note equal to the Exercise Price or relevant portion thereof, subject to compliance with applicable state and federal laws, rules and regulations. (d) In addition to and at the time of payment of the Exercise Price, the Optionee shall pay to the Company in cash the full amount of any federal, state, and local income, employment, or other withholding taxes applicable to the taxable income of such Optionee resulting from such exercise; provided, however, that in the discretion of the Committee any Stock Option Agreement may provide that all or any portion of such tax obligations, together with additional taxes not exceeding the actual additional taxes to be owed by the Optionee as a result of such exercise, may, upon the irrevocable election of the Optionee, be paid by tendering to the Company whole shares of Stock duly endorsed for transfer and owned by the Optionee, or by authorization to the Company to withhold shares of Stock otherwise issuable upon exercise of the Option, in either case in that number of shares having a Fair Market Value on the date of exercise equal to the amount of such taxes thereby being paid, and subject to such restrictions as to the approval and timing of any such election as the Committee may from time to time determine to be necessary or appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3 under the Exchange Act, if such rule is applicable. (e) The holder of an Option shall not have any of the rights of a shareholder with respect to the shares of Stock subject to the Option until such shares have been issued and transferred to the Optionee upon the exercise of the Option. 6.8 Reload Options. (a) The Committee may specify in a Stock Option Agreement (or may otherwise determine in its sole discretion) that a Reload Option shall be granted, without further action of the Committee, (i) to an Optionee who exercises an Option (including a Reload Option) by surrendering shares of Stock in payment of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for the same number of shares as are surrendered to pay such amounts, (iii) as of the date of such payment and at an Exercise Price equal to the Fair Market Value of the Stock on such date, and (iv) otherwise on the same terms and conditions as the Option whose exercise has occasioned such payment, except as provided below and subject to such other contingencies, conditions, or other terms as the Committee shall specify at the time such exercised Option is granted; provided, that the shares surrendered in payment as provided above must have been held by the Optionee for at least six months prior to such surrender. (b) Unless provided otherwise in the Stock Option Agreement, a Reload Option may not be exercised by an Optionee (i) prior to the end of a one-year period from the date that the Reload Option is granted, and (ii) unless the Optionee retains beneficial ownership of the shares of Stock issued to such Optionee upon exercise of the Option referred to above in Section 6.8(a)(i) for a period of one year from the date of such exercise. 6.9 Nonassignability and Nontransferability of Options. (a) Except as provided in Paragraph 6.9(b), no Option under the Plan shall be assignable or transferable by an Optionee, except by will or by the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order. Also, except as provided in Paragraph 6.9(b), during the life of the Optionee, such award shall be exercisable only by such person or by such person's guardian or legal representative. (b) Each non-Incentive Stock Option granted to an Optionee, to the extent so provided in such Optionee's individual Stock Option Agreement by the Committee, in its sole and absolute discretion, shall be transferable by gift to any member of the Optionee's immediate family or to a trust for the benefit of such immediate family member(s) and, if so transferred, shall be exercisable, solely by the transferee in the case of such transfer by gift. 6.10 Termination of Employment or Service. The Committee shall have the power to specify, with respect to the Options granted to a particular Optionee, the effect upon such Optionee's right to exercise an Option of termination of such Optionee's employment or service under various circumstance, which effect may include immediate or deferred termination of such Optionee's Rights under an Option, or acceleration of the date at which an Option may be exercised in full; provided, however, that in no event may an Incentive Stock Option be exercised after the expiration of ten years from the date of grant thereof. 6.11 Employment Rights. Nothing in the Plan or in any Stock Option Agreement shall confer on any person any Right to continue in the employ of the Company or any of its Subsidiaries, or shall interfere in any way with the right of the Company or any of its Subsidiaries to terminate such person's employment at any time. 6.12 Certain Successor Options. To the extent not inconsistent with the terms, limitations and conditions of Code section 422 and any regulations promulgated with respect thereto, an Option issued in respect of an option held by an employee to acquire stock of any entity acquired, by merger or otherwise, by the Company (or any Subsidiary of the Company) may contain terms that differ from those stated in this Article VI, but solely to the extent necessary to preserve for any such employee the rights and benefits contained in such predecessor option, or to satisfy the requirements of Code section 424(a). 6.13 Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable on an accelerated basis in the event that a Change in Control occurs with respect to the Company (and the Committee shall have the discretion to modify the definition of a Change in Control in a particular Option Agreement). If the Committee finds that there is a reasonable possibility that, within the succeeding six months, a Change in Control will occur with respect to the Company, then the Committee may determine that all outstanding Options shall be exercisable on an accelerated basis. ARTICLE VII RESTRICTED STOCK 7.1 Awards of Restricted Stock. The Committee may grant Awards of Restricted Stock, which shall be governed by a Restriction Agreement between the Company and the Grantee. Each Restriction Agreement shall contain such restrictions, terms, and conditions as the Committee may, in its discretion, determine, and may require that an appropriate legend be placed on the certificates evidencing the subject Restricted Stock. Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Award is granted, provided that the Grantee has executed the Restriction Agreement governing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute the foregoing documents within any time period prescribed by the Committee, the Award shall be void. At the discretion of the Committee, Shares issued in connection with an Award shall be deposited together with the stock powers with an escrow agent designated by the Committee. Unless the Committee determines otherwise and as set forth in the Restriction Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall have all of the rights of a shareholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares. 7.2 Non-Transferability. Until any restrictions upon Restricted Stock awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3, such shares of Restricted Stock shall not be transferable other than by will or the laws of descent and distribution, or pursuant to a Qualified Domestic Relations Order, nor shall they be delivered to the Grantee. 7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded hereunder shall lapse at such time or times (but with respect to any award to a Grantee who is also a Section 16 Insider, not less than six months after the date of the Award) and on such terms and conditions as the Committee may, in its discretion, determine at the time the Award is granted. After the grant of an Award, the Committee may only accelerate the lapse of restrictions on an Award prior to the end of the initial three year period following the grant of the Award (one-year if the restrictions on the Award are based on performance) in the event of a Change in Control, or the death, disability, or retirement of a Grantee. 7.4 Termination of Employment. The Committee shall have the power to specify, with respect to each Award granted to any particular Grantee, the effect upon such Grantee's rights with respect to such Restricted Stock of the termination of such Grantee's employment under various circumstances, which effect may include immediate or deferred forfeiture of such Restricted Stock or acceleration of the date at which any then-remaining restrictions shall lapse. 7.5 Treatment of Dividends. At the time an Award of Restricted Stock is made the Committee may, in its discretion, determine that the payment to the Grantee of any dividends, or a specified portion thereof, declared or paid on such Restricted Stock shall be (i) deferred until the lapsing of the relevant restrictions and (ii) held by the Company for the account of the Grantee until such lapsing. In the event of such deferral, there shall be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum determined by the Committee. Payment of deferred dividends, together with interest thereon, shall be made upon the lapsing of restrictions imposed on such Restricted Stock, and any dividends deferred (together with any interest thereon) in respect of Restricted Stock shall be forfeited upon any forfeiture of such Restricted Stock. 7.6 Delivery of Shares. Except as provided otherwise in Article IX below, within a reasonable period of time following the lapse of the restrictions on shares of Restricted Stock, the Committee shall cause a stock certificate to be delivered to the Grantee with respect to such shares and such shares shall be free of all restrictions hereunder. ARTICLE VIII STOCK CERTIFICATES The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any Option granted hereunder or any portion thereof, or deliver any certificate for shares of Restricted Stock granted hereunder, prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which the Stock is then listed; (b) The completion of any registration or other qualification of such shares which the Committee shall deem necessary or advisable under any federal or state law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body; (c) The obtaining of any approval or other clearance from any federal or state governmental agency or body which the Committee shall determine to be necessary or advisable; and (d) The lapse of such reasonable period of time following the exercise of the Option as the Board from time to time may establish for reasons of administrative convenience. Stock certificates issued and delivered to Grantees shall bear such restrictive legends as the Company shall deem necessary or advisable pursuant to applicable federal and state securities laws. ARTICLE IX TERMINATION AND AMENDMENT 9.1 Termination and Amendment. The Board may at any time terminate the Plan, and may at any time and from time to time and in any respect amend the Plan; provided, however, that the Board (unless its actions are approved or ratified by the Shareholders of the Company within twelve months of the date that the Board amends the Plan) may not amend the Plan to: (a) Increase the total number of shares of Stock issuable pursuant to Incentive Stock Options under the Plan or materially increase the number of shares of Stock subject to the Plan, in each case except as contemplated in Section 5.2 hereof; (b) Change the class of employees eligible to receive Incentive Stock Options that may participate in the Plan or materially change the class of persons that may participate in the Plan; or (c) Otherwise materially increase the benefits accruing to participants under the Plan. 9.2 Effect on Grantee's Rights. No termination, amendment, or modification of the Plan shall affect adversely a Grantee's rights under a Stock Option Agreement or Restriction Agreement without the consent of the Grantee or his legal representative. ARTICLE X RELATIONSHIP TO OTHER COMPENSATION PLANS The adoption of the Plan shall not affect any other stock option, incentive, or other compensation plans in effect for the Company or any of its Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of its Subsidiaries from establishing any other form of incentive or other compensation plan for employees or Directors of Company or any of its Subsidiaries. ARTICLE XI MISCELLANEOUS 11.1 Replacement or Amended Grants. At the sole discretion of the Committee and subject to the terms of the Plan, the Committee may amend or modify outstanding Options or Awards; provided however, that no modification of an Option or Award shall adversely affect a Grantee's rights under a Stock Option Agreement or Restriction Agreement without the consent of the Grantee or his legal representative. Notwithstanding any other provision herein to the contrary, the Committee may, pursuant to Section 5.2 hereof, exchange or substitute outstanding Options or Awards or adjust the exercise price of outstanding Options or Awards without a Grantee's consent. 11.2 Forfeiture for Competition. If a Grantee provides services to a competitor of the Company or any of its Subsidiaries, whether as an employee, officer, director, independent contractor, consultant, agent, or otherwise, such services being of a nature that can reasonably be expected to involve the skills and experience used or developed by the Grantee while an Employee, then that Grantee's rights under any Options outstanding hereunder shall be forfeited and terminated, and any shares of Restricted Stock held by such Grantee subject to remaining restrictions shall be forfeited, subject in each case to a determination to the contrary by the Committee. 11.3 Plan Binding on Successors. The Plan shall be binding upon the successors and assigns of the Company. 11.4 Singular, Plural; Gender. Whenever used herein, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender. 11.5 Headings, etc., No Part of Plan. Headings of Articles and Sections hereof are inserted for convenience and reference; they do not constitute part of the Plan. 11.6 Interpretation. With respect to Section 16 Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Plan administrators fails to so comply, it shall be deemed void to the extent permitted by law and deemed advisable by the Plan administrators. Exhibit A to Modis Professional Services, Inc. Incorporated Amended and Restated 1995 Stock Option Plan - Form of Stock Option Agreement MODIS PROFESSIONAL SERVICES, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this day of _______, ______, by and between Modis Professional Services, Inc., a Florida corporation (the "Company "), and _____________ (the "Optionee"). WHEREAS, on August 24, 1995, the Board of Directors of the Company adopted a stock option plan known as the "Modis Professional Services, Inc. Amended and Restated 1995 Stock Option Plan" (the "Plan"), and recommended that the Plan be approved by the Company's shareholders; and WHEREAS, the Committee has granted the Optionee a stock option to purchase the number of shares of the Company's common stock as set forth below, and in consideration of the granting of that stock option the Optionee intends to remain in the employ of the Company; and WHEREAS, the Company and the Optionee desire to enter into a written agreement with respect to such option in accordance with the Plan. NOW, THEREFORE, as an employment incentive and to encourage stock ownership, and also in consideration of the mutual covenants contained herein, the parties hereto agree as follows. 1. Incorporation of Plan. This option is granted pursuant to the provisions of the Plan and the terms and definitions of the Plan are incorporated herein by reference and made a part hereof. A copy of the Plan has been delivered to, and receipt is hereby acknowledged by, the Optionee. 2. Grant of Option. Subject to the terms, restrictions, limitations and conditions stated herein, the Company hereby evidences its grant to the Optionee, not in lieu of salary or other compensation, of the right and option (the "Option") to purchase all or any part of the number of shares of the Company's Common Stock, par value $.01 per share (the "Stock"), set forth on Schedule A attached hereto and incorporated herein by reference. The Option shall be exercisable in the amounts and at the time specified on Schedule A. The Option shall expire and shall not be exercisable on the date specified on Schedule A or on such earlier date as determined pursuant to Sections 8, 9, or 10 hereof. Schedule A states whether the Option is intended to be an Incentive Stock Option. 3. Purchase Price The price per share to be paid by the Optionee for the shares subject to this Option (the "Exercise Price") shall be as specified on Schedule A, which price shall be an amount not less than the Fair Market Value of a share of Stock as of the Date of Grant (as defined in Section 11 below) if the Option is an Incentive Stock Option. 4. Exercise Terms. The Optionee must exercise the Option for at least the lesser of 100 shares or the number of shares of Purchasable Stock as to which the Option remains unexercised. In the event this Option is not exercised with respect to all or any part of the shares subject to this Option prior to its expiration, the shares with respect to which this Option was not exercised shall no longer be subject to this Option. 5. Option Non-Transferable. No Option shall be transferable by an Optionee other than by will or the laws of descent and distribution or, in the case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations Order, and no Option shall be transferable by an Optionee who is a Section 16 Insider prior to shareholder approval of the Plan. During the lifetime of an Optionee, Options shall be exercisable only by such Optionee (or by such Optionee's guardian or legal representative, should one be appointed). 6. Notice of Exercise of Option. This Option may be exercised by the Optionee, or by the Optionee's administrators, executors or personal representatives, by a written notice (in substantially the form of the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or by such administrators, executors or personal representatives, and delivered or mailed to the Company as specified in Section 14 hereof to the attention of the President or such other officer as the Company may designate. Any such notice shall (a) specify the number of shares of Stock which the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, then elects to purchase hereunder, (b) contain such information as may be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by (i) a certified or cashier's check payable to the Company in payment of the total Exercise Price applicable to such shares as provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or accompanied by stock transfer powers having a Fair Market Value equal to the total Exercise Price applicable to such shares purchased hereunder, or (iii) a certified or cashier's check accompanied by the number of shares of Stock whose Fair Market Value when added to the amount of the check equals the total Exercise Price applicable to such shares purchased hereunder. Upon receipt of any such notice and accompanying payment, and subject to the terms hereof, the Company agrees to issue to the Optionee or the Optionee's administrators, executors or personal representatives, as the case may be, stock certificates for the number of shares specified in such notice registered in the name of the person exercising this Option. 7. Adjustment in Option. The number of Shares subject to this Option, the Exercise Price and other matters are subject to adjustment during the term of this Option in accordance with Section 5.2 of the Plan. 8. Termination of Employment. (a) Except as otherwise specified in Schedule A hereto, in the event of the termination of the Optionee's employment with the Company or any of its Subsidiaries, other than a termination that is either (i) for cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability or retirement, the Optionee may exercise this Option at any time within 30 days after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. (b) Except as specified in Schedule A attached hereto, in the event of a termination of the Optionee's employment that is either (i) for cause or (ii) voluntary on the part of the Optionee and without the written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. (c) Unless and to the extent otherwise provided in Exhibit A hereto, in the event of the retirement of the Optionee at the normal retirement date as prescribed from time to time by the Company or any Subsidiary, the Optionee shall continue to have the right to exercise any Options for shares which were Purchasable at the date of the Optionee's retirement [provided that, on the date which is three months after the date of retirement, the Options will become void and unexercisable unless on the date of retirement the Optionee enters into a noncompete agreement with Modis Professional Services, Inc. and continues to comply with such noncompete agreement]. This Option does not confer upon the Optionee any right with respect to continuance of employment by the Company or by any of its Subsidiaries. This Option shall not be affected by any change of employment so long as the Optionee continues to be an employee of the Company or one of its Subsidiaries. 9. Disabled Optionee. In the event of termination of employment because of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her personal representative) may exercise this Option at any time within three months after such termination to the extent of the number of shares which were Purchasable hereunder at the date of such termination. 10. Death of Optionee. Except as otherwise set forth in Schedule A with respect to the rights of the Optionee upon termination of employment under Section 8(a) above, in the event of the Optionee's death while employed by the Company or any of its Subsidiaries or within three months after a termination of such employment (if such termination was neither (i) for cause nor (ii) voluntary on the part of the Optionee and without the written consent of the Company), the appropriate persons described in Section 6 hereof or persons to whom all or a portion of this Option is transferred in accordance with Section 5 hereof may exercise this Option at any time within a period ending on the earlier of (a) the last day of the three month period following the Optionee's death or (b) the expiration date of this Option. If the Optionee was an employee of the Company at the time of death, this Option may be so exercised to the extent of the number of shares that were Purchasable hereunder at the date of death. If the Optionee's employment terminated prior to his or her death, this Option may be exercised only to the extent of the number of shares covered by this Option which were Purchasable hereunder at the date of such termination. 11. Post-Termination Covenants. (a) For a period of one (1) year following any termination of Employee's employment with the Company or any of its subsidiary corporations at which Employee was employed (hereinafter "Employer"), whether voluntary or involuntary, Employee agrees not to directly or indirectly solicit or accept business from Employer's clients for any business which competes with Employer (including for this purpose, any subsidiary or other affiliate of such client) which account was solicited, serviced or supervised by the Employee, (any, if Employee is a branch or regional manager, or the equivalent title, of Employer, any client which was solicited or serviced by the Employee's branch or region) during his or her employment with Employer. (b) For a period of one (1) year following any termination of Employee's employment with Employer, whether voluntary or involuntary, Employee agrees not to hire, recruit or attempt to recruit for any business which competes with Employer any person employed or contracted with by Employer, either currently or during the twelve (12) month period prior to Employee's termination of employment with Employer. (c) For technical or billable employees, for a period of one (1) year following any termination of Employee's employment with Employer, Employee shall not either directly or indirectly provide services similar to the services Employee provided through Employer at any location or work site to which Employee was assigned by Employer or for the benefit of any client of Employer: (i) for which Employee provided services through Employer; or (ii) to which Employer provided information regarding employment, potential employment or contractor opportunities to Employee. (d) If similar post-termination covenants are included in Employee's Service/Employment Agreement or Consultant Employment Agreement, then those covenants shall take precedence over the covenants herein to the extent a broader covenant or longer post-termination period is contemplated by those agreements. 12. Date of Grant. This Option was granted by the Committee on the date set forth in Schedule A (the "Date of Grant"). 13. Compliance with Regulatory Matters. The Optionee acknowledges that the issuance of capital stock of the Company is subject to limitations imposed by federal and state law and the Optionee hereby agrees that the Company shall not be obligated to issue any shares of Stock upon exercise of this Option that would cause the Company to violate law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission) having jurisdiction over the affairs of the Company. The Optionee agrees that he or she will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Stock complies with the provisions described by this Section 12. 14. Restriction on Disposition of Shares. The shares purchased pursuant to the exercise of an Incentive Stock Option shall not be transferred by the Optionee except pursuant to the Optionee's will, or the laws of descent and distribution, until such date which is the later of two years after the grant of such Incentive Stock Option or one year after the transfer of the shares to the Optionee pursuant to the exercise of such Incentive Stock Option. 15. Miscellaneous. (a) This Agreement shall be binding upon the parties hereto and their representatives, successors and assigns. (b) This Agreement is executed and delivered in, and shall be governed by the laws of, the State of Florida. (c) Any requests or notices to be given hereunder shall be deemed given, and any elections or exercises to be made or accomplished shall be deemed made or accomplished, upon actual delivery thereof to the designated recipient, or three days after deposit thereof in the United States mail, registered, return receipt requested and postage prepaid, addressed, if to the Optionee, at the address set forth below and, if to the Company, to President and Chief Executive Officer of the Company the executive offices of the Company at 1 Independent Drive, Jacksonville, FL 32202. (d) This Agreement may not be modified except in writing executed by each of the parties hereto. IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Stock Option Agreement to be executed on behalf of the Company and the Company's seal to be affixed hereto and attested by the Secretary or an Assistant Secretary of the Company, and the Optionee has executed this Stock Option Agreement under seal, all as of the day and year first above written. MODIS PROFESSIONAL SERVICES, INC. OPTIONEE By:__________________________ Name: Name: Title: Address: ATTEST: - ----------------------------- Secretary/Assistant Secretary [SEAL] SCHEDULE A TO STOCK OPTION AGREEMENT BETWEEN MODIS PROFESSIONAL SERVICES, INC. AND ---------------------------- Dated: _______ 1. Number of Shares Subject to Option: ____ Shares. 2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option. 3. Option Exercise Price: $____ per Share. 4. Date of Grant: ___________ 5. Option Vesting Schedule: Check one: ( ) Options are exercisable with respect to all shares on or after the date hereof ( ) Options are exercisable with respect to the number of shares indicated below on or after the date indicated next to the number of shares: No. of Shares Vesting Date 6. Option Exercise Period: Check One: ( ) All options expire and are void unless exercised on or before ________, 19__. ( ) Options expire and are void unless exercised on or before the date indicated next to the number of shares: No. of Shares Expiration Date 7. Effect of Termination of Employment of Optionee (if different from that set forth in Sections 8 and 10 of the Stock Option Agreement): SCHEDULE B NOTICE OF EXERCISE The undersigned hereby notifies Modis Professional Services, Inc. (the "Company") of this election to exercise the undersigned's stock option to purchase _______ shares of the Company's common stock, par value $.01 per share (the "Common Stock"), pursuant to the Stock Option Agreement (the "Agreement") between the undersigned and the Company dated ___________. Accompanying this Notice is (1) a certified or a cashier's check in the amount of payable to the Company, and/or (2) _______ shares of the Company's Common Stock presently owned by the undersigned and duly endorsed or accompanied by stock transfer powers, having an aggregate Fair Market Value (as defined in the Modis Professional Services, Inc. 1995 Stock Option Plan) as of the date hereof of $_________, such amounts being equal, in the aggregate, to the purchase price per share set forth in Section 3 of the Agreement multiplied by the number of shares being purchased hereby (in each instance subject to appropriate adjustment pursuant to Section 5.2 of the Agreement). IN WlTNESS WHEREOF, the undersigned has set his hand and seal, this day of _________, 19__. OPTIONEE [OR OPTIONEE'S ADMINISTRATOR, EXECUTOR OR PERSONAL REPRESENTATIVE] - ------------------------------- Name: Position (if other than Optionee): EX-10 5 asciiawardnotification.txt EX. 10.3 FORM OF AWARD NOTIFICATION NOTIFICATION OF 2001 CORPORATE AND INDIVIDUAL PERFORMANCE OBJECTIVES UNDER SENIOR EXECUTIVE ANNUAL INCENTIVE PROGRAM ("AWARD NOTIFICATION") Name: _________________ Position: _________________ This document serves as notification of your base salary and performance goals effective January 1, 2001 Base Salary: * $_______________ Annual Incentive Award Opportunities: * Threshold - ___% * Target - ___% * Maximum - __% 2001 Corporate Performance Objectives (actual performance achievement between threshold, target, and maximum levels will be interpolated): 1. Corporate Earnings Target as established by Compensation Committee $ 2001 Individual Performance Objectives (evaluated only if Corporate Performance Objectives are not reached) EX-10 6 asciimarshallemployment.txt EX. 10.4 JOHN L. MARSHALL III EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT is made effective as of the 1st day of February, 2001, by and between MODIS PROFESSIONAL SERVICES, INC., a Florida corporation, and its successors ("Employer"), and JOHN L. MARSHALL III a resident of the State of Florida ("Executive"). WHEREAS, the Employer and the Executive entered into an employment agreement dated November 1, 2000; and WHEREAS, the Employer and Executive wish to enter into an amended and restated employment agreement, which agreement shall replace and thereby supersede all prior employment agreements and any amendments thereto previously executed between the Employer and executive; NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants, and subject to the terms and conditions contained in this Agreement, the Employer and Executive, intending to be legally bound, hereby agree as follows: 1. Employment. Employer hereby employs Executive as Senior Vice President and Deputy General Counsel of Employer and in such other capacities with subsidiaries or business units of Employer as Employer may request, and Executive hereby accepts employment by Employer, in accordance with and subject to the terms and conditions of this Agreement. The Executive will report directly to the Chief Executive Officer of the Employer and, for services performed as Deputy General Counsel, will report jointly to the Chief Executive Officer and the General Counsel of Employer. 2. Duties and Authority. As Senior Vice President of Employer, Executive shall be responsible for directing and managing the Employer's Group Services business unit, comprised of the Technical Services group, the HRIS/Benefits/Risk Management group, and the Corporate Purchasing and Facilities Management group, as well as such other groups as may be included in Employer's Group Services business unit from time to time, and such other duties as are assigned to Executive by the Chief Executive Officer of Employer. As Deputy General Counsel of Employer, Executive shall provide advice and counsel to Employer concerning compliance with all securities matters, including acquisitions and dispositions. Executive agrees to devote his full time, attention and best efforts to the performance of his duties hereunder; provided, however, it shall not be considered a violation of the foregoing for the Executive to assist in the legal affairs of corporate affiliates of Employer or to serve on corporate, industry, civic or charitable boards or committees, so long as such activities do not materially interfere with the performance of the Executive's responsibilities as an employee of the Employer in accordance with this Agreement. 3. Initial Term; Employment Period. The initial term of employment shall begin on February 1, 2001 and end on December 31, 2001 (the "Term of this Agreement"). The Term of this Agreement shall be extended automatically for one year on December 31, 2001, and each annual anniversary thereof (the "Extension Date") unless, and until, at least 90 days prior to the applicable Extension Date either the Employer or the Executive provides written notice to the other party that this Agreement is not to be extended (the later of December 31, 2001 or the last date to which the Term is extended shall be the "End of Term"). For purposes of this Agreement, the period beginning on July 1, 2000, and ending on the Date of Termination (as hereafter defined) shall be referred to herein as the "Employment Period". 4. Compensation. During the Employment Period which is in the Term of this Agreement, Executive shall receive the following compensation: A. Base Salary. A base annual salary of $ 200,000, payable in accordance with the Employer's standard practice for other comparable executives. Executive's base salary shall be subject to annual review by the Board of Directors of Employer (the "Board") for discretionary periodic increases in accordance with the Employer's compensation policies. References to "Base Salary" in this Agreement shall be to the base salary set forth in this Section 4.A. and shall include any increases to such base salary made hereby. B. Incentive Compensation. The Executive shall be entitled to a target incentive compensation opportunity expressed as a percentage of Base Salary of not less than 60% under Employer's Senior Executive Annual Incentive Plan (or successor plan) ("Incentive Comp."). 5. Stock Options. Employer shall continue to grant stock options from time to time in a manner consistent with that to which it grants to other senior executive officers of the Employer to purchase shares of the common stock of the Employer pursuant to the Modis Professional Services, Inc. Amended and Restated 1995 Stock Option Plan, as amended from time to time, or pursuant to a newly established or successor plan. A. Exercise. Any existing stock option(s) held by Executive and any stock options granted after the effective date of this Agreement shall provide for: (i) exercisability of vested options (including those vested under paragraph 5.A.(ii) below) for at least two years following the Executive's termination of employment with the Employer (or if sooner, 10 years from date of grant of the option); (ii) full vesting of options upon a Change in Control (as hereafter defined) or termination of the Executive's employment with the Employer for reasons other than (i) by the Employer for Cause (as hereafter defined) or (ii) by the Executive without Good Reason (as hereafter defined); and (iii) exercisability only to the extent vested on the date of the Executive's termination of employment with the Employer, in the event of termination (i) by the Employer for Cause, or (ii) by the Executive without Good Reason; and B. For purposes of this Agreement, "Change in Control" shall mean any of the following events: (i) the acquisition by any person or persons (as such term is used in Section 13(d) of the Securities Exchange Act of 1934) of legal or beneficial ownership of 35% or more of either (a) the then outstanding shares of common stock of the Employer or (b) the combined voting power of the then outstanding voting securities of the Employer entitled to vote generally in the election of directors; (ii) individuals who, as of the date hereof, constitute the Board cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Employer's shareholders, was approved by a vote of at least a majority of the directors then comprising the Board shall be considered as though such individual were a member of the Board as of the date hereof; (iii) approval by the shareholders of the Employer of a reorganization, merger, or consolidation, in each case unless the shareholders of the Employer immediately before such reorganization, merger, or consolidation own, directly or indirectly, immediately following such reorganization, merger, or consolidation at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from such reorganization, merger, or consolidation in substantially the same proportion as their ownership of the voting securities immediately before such reorganization, merger or consolidation; or (iv) approval by the shareholders of the Employer of (a) a complete liquidation or dissolution of the Employer, or (b) the sale or other disposition of more than 50% of the assets of the Employer within a twelve month period. 6. Benefits. To the extent not otherwise provided herein (it being the intent not to duplicate benefits) during the term of this Agreement, Employer shall provide the Executive with all retirement, welfare, deferred compensation, disability and other benefits generally provided to all of the Employer's other senior executive officers. Executive shall be entitled to four (4) weeks of paid vacation per calendar year. Unused vacation shall be paid out at calendar year end. The Employer shall reimburse the Executive for all reasonable and necessary expenses incurred while conducting business in accordance with policies adopted by the Employer from time to time. The Employer shall reimburse the Executive for all reasonable and necessary expenses incurred while conducting the Employer's business in accordance with policies adopted by the Employer from time to time. The Employer shall pay the membership dues for the Executive for the River Club. The Employer shall also pay up to $1000 annually for professional membership dues and will also pay seminar expenses incurred by Executive sufficient to meet Executive's continuing legal education obligations. Furthermore, the Employer shall pay the Executive or a leasing company, at the Executive's option, $750 per month for an automobile used by the Executive for business purposes. The Executive acknowledges that pursuant to the Internal Revenue Code, and the regulations promulgated thereunder, the Employer may be required to report for tax purposes all or a portion of certain of the benefits and reimbursements provided in this Agreement as income in respect of the Executive. 7. Non-Compete; Confidentiality. In consideration of the employment of Executive by Employer, Executive agrees as follows: A. Non-Compete and Non-Solicitation. During Executive's employment with Employer and for a period of two (2) years thereafter, whatever the reason for Employee's termination or separation of employment from Employer, and unless Executive receives Employer's advance written waiver, Executive shall not, either directly or indirectly, either on his own behalf or on behalf of another business, engage in or assist others in the following activities: (i) Soliciting, hiring, recruiting, or attempting to recruit, for any business competing with Employer or its affiliates, any person employed or contracted with by Employer, or employed or contracted with by Employer during the twelve (12) months immediately prior to Executive's termination or separation of employment from Employer; (ii) Soliciting or accepting, for any business which competes with Employer, any business from any Employer Client(s), for which services were provided or actively solicited by Employer during the twelve (12) months immediately prior to Executive's termination or separation of employment from Employer, and which services or solicitation were or was conducted by or through Employer office(s) over which he had either direct or indirect managerial authority. For purposes of this provision, "Employer Client(s)" are defined as those persons, businesses, governmental agencies and nonprofit organizations either currently doing business with Employer at the time of the separation or termination of Executive's employment from Employer or to which Employer provided or actively solicited services during the twelve (12) months immediately prior to the separation or termination of Executive's employment from Employer; (iii) Entering into, engaging in, being employed by, being connected to, consulting or rendering services for, any business which competes with, or is similar to, Employer's business, or business known to Executive as planned to be conducted by Employer at the time of Executive's termination or separation from employment with Employer; provided, however, that nothing herein shall prohibit the Executive from engaging in the private practice of law. The non-compete restriction in this subsection shall apply throughout the United States; provided, however, if Employee is assigned a particular smaller geographic territory capable of measurement, and Employee works in that territory for at least 180 consecutive days prior to Employee's termination or separation of employment from Idea Integration, then the geographic restriction in this subsection shall apply to the lesser of the United States or the last precise territory in which Employee worked for at least 180 consecutive days. B. Non-Disclosure of Information. Executive will not at any time, during or after the term of this Agreement in any fashion, form, or manner, either directly or indirectly, divulge, disclose, or communicate to any person, firm, or corporation, in any manner whatsoever, any information of any kind, nature, or description concerning any matters affecting or relating to the business of the Employer, including, but not limited to, the names of any of its customers or prospective customers or any other information concerning the business of the Employer, its manner of operation, its plans, its vendors, its suppliers, its advertising, its marketing, its methods, its practices, or any other information of any kind, nature, or description, without regard to whether any or all of the foregoing matters would otherwise be deemed confidential, material, or important; provided, however that this provision shall not prevent disclosures by Executive to the extent such disclosures are (i) believed by the Executive, in good faith and acting reasonably, to be in the best interest of the Employer, (ii) of information that is public at the time of the disclosure (other than as a result of the Executive's violation of this Paragraph 7(b)), or (iii) as required by law or legal process (and, if the Executive is so required to disclose, Executive shall provide the Employer notice of such to allow the Company the opportunity to contest such disclosure). 8. Termination of Employment. A. Death or Disability.. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. Additionally, if the Employer determines in good faith that the Executive has incurred a Disability, it may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Employer shall terminate effective on the later of (i) the date in the notice, (ii) the day after receipt of such notice by the Executive, or (iii) the date the Disability has been considered to occur (the "Disability Effective Date"), provided that, prior to such date, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall have the meaning set forth in the Employee's long term disability plan or policy covering the Executive and shall not be considered to have occurred until after the waiting period as required by such plan or policy. B. Cause. The Employer may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a breach by the Executive of the Executive's obligations under paragraph 2 above (other than as a result of temporary incapacity due to physical or mental illness, or Disability) which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Employer and which is not remedied in a reasonable period of time (to be not less than 15 days) after receipt of written notice from the Employer specifying such breach or (ii) the conviction of the Executive of a felony; or (iii) a breach of the Executive's fiduciary duty. No act or failure to act on the Executive's part shall be considered willful unless done or omitted in bad faith and without reasonable belief that the action or omission was in the best interest of the Employer. C. Good Reason. The Executive's employment may be terminated by the Executive at any time for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment of the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirement), authority, duties or responsibilities as contemplated by paragraph 2 or any other action by the Employer which results in a diminution in such position, authority, duties or responsibilities, (ii) a reduction in the Executive's Base Salary or maximum bonus opportunity which is more than de minimis (except if such reduction is a part of a reduction for all executive officers of the Employer); (iii) a reduction which is more than de minimis (except if such reduction is a part of a reduction for all executive officers of the Employer) in the level of incentive compensation (including stock options, restricted stock awards, stock appreciation rights, retirement plan accruals and/or welfare plan benefits (within the meaning of Section 3(1) of ERISA) accruing or provided to the Executive; (iv) any failure by the Employer to comply with any of the provisions of this Agreement, (v) Employer's requiring the Executive to be based at any office or location other than Jacksonville, Florida; or (vi) the Employer's providing notice to to Paragraph 3 that the Agreement will not be extended, unless the purpose of such notice is to negotiate the terms of a new agreement between the Employer and the Executive and the notice provides that the Agreement continues in effect until such new agreement is entered into. For purposes of this subparagraph C, any good faith determination of "Good Reason" made by the Executive shall be conclusive. However, no such event described hereunder shall constitute Good Reason unless the Executive has given written notice to the Employer specifying the event relied upon for such termination within one year after the occurrence of such event and the Employer has not remedied such within 60 days of receipt of such notice. The Employer and the Executive, upon mutual written agreement, may waive any of the foregoing provisions which would otherwise constitute Good Reason. D Notice of Termination. Any termination by the Employer for Cause, or by the Executive for Good Reason, shall be communicated to the other party by Notice of Termination. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment; and (iii) specifies the Date of Termination (as defined below). Notice of intent to terminate employment for Good Reason must be provided pursuant to Section 8.C. of this Agreement. The failure by the Executive or the Employer to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Employer hereunder or preclude the Executive or the Employer from asserting such fact or circumstance in enforcing the Executive's or the Employer's rights hereunder. E. Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Employer for Cause, or by the Executive for Good Reason, the date specified in the Notice of Termination as the Date of Termination; (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be; and (iii) if Executive's employment is terminated by either party other than for death, Disability, Cause or Good Reason, the date set forth in the notice required under subparagraph D. above as the Date of Termination is to be effective. 9. Obligations of the Employer upon Termination. Upon termination of the Executive's employment for any reason during the Term of this Agreement, Executive shall be entitled to Base Salary and all benefits through the Date of Termination, and to exercise then vested stock options in accordance with Paragraph 5.A.(i) above. Upon the termination of the Executive's employment during the Term of this Agreement by the Executive for Good Reason, or by the Employer for any reason other than Cause, Executive shall in addition be entitled to exercise the option(s) with accelerated vesting pursuant to Paragraph 5.A.(ii) above. In addition, upon the termination of the Executive's employment during the Term of this Agreement by the Executive for Good Reason, or by the Employer for any reason other the Cause, Disability or death, the Executive shall be entitled to receive a lump sum payment equal to two (2) times the sum of (i) Executive's Base Salary as of the Date of Termination and (ii) the Executive's threshhold bonus opportunity under the Senior Executive Incentive Compensation Plan for the year of termination. The lump sum payment shall be paid no later than thirty days after the Date of Termination in immediately available United States funds. Notwithstanding the preceding provisions, at the Employer's sole discretion, the Employer may pay the amount determined as a lump sum in this Paragraph 9 in 24 equal monthly payments beginning on the first day of the month first following the Date of Termination. 10. Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The amounts provided for under this Agreement shall not be reduced by any compensation earned or benefits received by the Executive as the result of self-employment or employment by another employer or otherwise. 11. Tax Effect. If Independent Tax Counsel shall determine that the aggregate payments made, and benefits provided, to the Executive pursuant to this Agreement and any other payments, and benefits provided, to the Executive from the Employer, its affiliates and plans, which constitute "parachute payments" as defined in Section 280G of the Code (or any successor provision thereto) ("Parachute Payments") would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount (determined by Independent Tax Counsel) such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed with respect to such taxes, the Executive retains from the Gross-Up Payment an amount equal to the Excise Tax imposed upon the payments. For purposes of this Paragraph, "Independent Tax Counsel" shall mean a lawyer, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm with expertise in the area of executive compensation tax law, who shall be selected by the Employer and shall be reasonably acceptable to the Executive, and whose fees and disbursements shall be paid by the Employer. A. If Independent Tax Counsel shall determine that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that the Executive has substantial authority not to report any Excise Tax on the Executive's Federal income tax return. If the Executive is subsequently required to make a payment of any Excise Tax, then the Independent Tax Counsel shall determine the amount of such additional payment ("Gross-Up Underpayment"), and any such Gross-Up Underpayment shall be promptly paid by the Employer to or for the benefit of the Executive. The fees and disbursements of the Independent Tax Counsel shall be paid by the Employer. B. The Executive shall notify the Employer in writing within 15 days of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of a Gross-Up Payment. If the Employer notifies the Executive in writing that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall: (i) give the Employer any information reasonably requested by the Employer relating to such claim; (ii) take such action in connection with contesting such claim as the Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Employer; (iii) cooperate with the Employer in good faith in order to effectively contest such claim; and (iv) permit the Employer to participate in any proceedings relating to such claim; provided, however, that the Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. The Employer shall control all proceedings taken in connection with such contest; provided, however, that if the Employer directs the Executive to pay such claim and sue for a refund, the Employer shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance. C. If, after the receipt by the Executive of an amount advanced by the Employer pursuant to this Paragraph 11, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall, within 10 days, pay to the Employer the amount of such refund, together with any interest paid or credited thereon after taxes applicable thereto. 12. Mandatory Deductions. Any amounts to which Executive is entitled as compensation, bonus, merit bonus, or any other form of compensation subject to withholding, shall be subject to usual deduction for appropriate federal, state, and local income and employment tax obligations of Executive. 13. Notices. Any notice provided for in this Agreement shall be given in writing. Notices shall be effective from the date of receipt, if delivered personally to the party to whom notice is to be given, or on the second day after mailing, if mailed by first class mail, postage prepaid. Notices shall be properly addressed to the parties at their respective addresses set forth below or to such other address as either party may later specify by notice to the other: If to Employer: Modis Professional Services, Inc. Attn: Chief Executive Officer 1 Independent Drive Jacksonville, Florida 32202 If to Executive: John L. Marshall III at the then current address of the Executive appearing in the corporate records of Employer 14. Entire Agreement. This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof, including, but not limited to, any and all prior employment agreements and related amendments entered into between the Employer and the Executive. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment or modification is sought. 15. Waiver. The waiver by one party of a breach of any of the provisions of this Agreement by the other shall not be construed as a waiver of any subsequent breach. 16. Attorney's Fees. In the event of litigation or other dispute resolution proceeding involving the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover from the other all fees, costs and expenses incurred in connection therewith, including attorney's fees through appeal. 17. Tax Withholding. The Employer shall have the right to deduct from all benefits and/or payments under the Agreement any taxes required by law to be paid or withheld with respect to such benefits or payments. 18. Governing Law; Venue. The Agreement shall be construed and enforced in accordance with the laws of the State of Florida. Duval County, Florida, shall be proper venue for any litigation arising out of this Agreement. 19. Paragraph Headings. Paragraph headings are for convenience only and are not intended to expand or restrict the scope or substance of the provisions of this Agreement. 20. Assignability. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. This Agreement is a personal employment agreement and the rights, obligations and interests of the Executive hereunder may not be sold, assigned, transferred, pledged or hypothecated. 21. Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement shall remain in full force and shall in no way be impaired. 22. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to account for more than one such counterpart. IN WITNESS WHEREOF, the parties have executed this Agreement the _____ day of ____________, 2001 with effect as of the date first above written. EXECUTIVE - --------------------------- --------------------------- John L. Marshall III - --------------------------- Witnesses EMPLOYER ___________________________ By:___________________________ Its - --------------------------- Witnesses -----END PRIVACY-ENHANCED MESSAGE-----